Evolent Health to Buy Valence Health For $145 Million, Expects To Meet Or Top 2Q Guidance

Evolent Health, Inc.

and Valence Health, Inc. revealed Wednesday that they reached a definitive agreement paving the way for the former to buy the majority of Valence Health's business for about $145 million. The company also indicated that it would meet or top its guidance for the second quarter, as well as, fiscal year 2016. According to Evolent Health, the combination brings two innovative firms together that serve health care providers in the transition to value-based care. Put together, the two companies would be able to provide complete services and technology in a variety of populations. They would serve over 1.8 million lives in 23 long-term operating partners at closing. It would consist of provider-sponsored health plans, accountable care organizations and full-risk entities. The company's CEO, Frank Williams, said, "By adding Valence Health's services to Evolent, we expect to strengthen our operational capabilities and expertise, expanding our ability to support provider organizations in delivering higher quality, lower cost care." He continued to add, "Strategically, we have tightly aligned visions of improving health care through innovative technology and services that help providers succeed as the industry continues its adoption of value-based payment models. Practically, we expect the addition of Valence Health's talented team and their experience in value-based administration will advance our ability to drive results for a broader set of clients, providers and patients. We are looking forward to welcoming Valence Health employees and clients to the Evolent team." Evolent was established in 2011 to support providers in moving to a population health model of care delivery while Valence Health was founded in 1996 and provides value-based administration, population health and advisory services. The company indicated that the acquisition price was based on the closing price of its Class A common stock on the NYSE on July 12, 2016, and consisted of 5.84 million shares of Evolent Class A common stock and $35 million in cash. The transaction included an earn-out of maximum of $50 million, payable in Class A common stock, tied to future new business activity. Evolent said that it expects the acquired business to generate revenues of approximately $80-85 million for the current year on a standalone basis. However, it would consolidate the results of the acquired business only for the period following the completion of the transaction. The stock advanced 1.52 percent on Tuesday.