ALHAMBRA, Calif. - Astrana Health, Inc. (NASDAQ: ASTH), a technology-powered healthcare company, has entered into a definitive agreement to acquire Prospect Health, including its health plan and medical groups across four states. The transaction, valued at $745 million, is expected to close by mid-2025, subject to regulatory approval and other conditions.
Prospect Health, an integrated care delivery system, coordinates clinical care for approximately 610,000 members across Medicare Advantage, Medicaid, and commercial lines. This acquisition will expand Astrana's provider network and is anticipated to serve a combined 1.7 million members nationwide.
Brandon K. Sim, President and CEO of Astrana, emphasized the shared mission and culture of patient-centric care between the two organizations. He anticipates the acquisition will enhance access, quality, and value for members, particularly in Orange County, California, where Astrana currently has limited operations.
Jim Brown, CEO of Prospect, expressed enthusiasm for the partnership, citing the benefits of a larger, more coordinated network for community healthcare. Both companies expect financial and operational synergies from the merger.
Astrana plans to fund the purchase through cash on hand and a $1,095 million bridge loan from Truist Bank and J.P. Morgan. Prospect is projected to generate around $1.2 billion in revenue with an estimated adjusted EBITDA of $81 million for the twelve months ending December 31, 2024.
Advisory roles are filled by J.P. Morgan Securities LLC for Astrana and Morgan Stanley (NYSE:MS) & Co. LLC, along with Guggenheim Partners, for Prospect.
Astrana, headquartered in Alhambra, California, supports over 12,000 providers and 1.1 million Americans in value-based care arrangements. The company's platform aims to enable providers to deliver quality care cost-effectively.
The acquisition's financial details have been shared on Astrana's Investor Relations website. Additionally, a conference call was held today to discuss the transaction details.
This report is based on a press release statement and contains forward-looking statements that involve risks and uncertainties. Actual results may differ from those discussed. The press release also includes non-GAAP financial measures, such as adjusted EBITDA, which should not be considered in isolation from GAAP financial measures.
In other recent news, Astrana Health has seen significant developments in both its business strategy and financial outlook. The company has successfully completed the acquisition of several healthcare entities, including Collaborative Health Systems, Golden Triangle Physician Alliance, and Heritage Physician Networks. This strategic move is set to strengthen Astrana Health's portfolio and broaden its client base.
Analysts have taken note, with TD Cowen initiating coverage on Astrana Health and assigning a Buy rating. The firm anticipates continued growth for the company, particularly in its ability to convert enrollees from partial to full risk. Similarly, KeyBanc started its coverage of Astrana Health with a Sector Weight rating, emphasizing the company's diversified payor contracts and delegated capabilities as key factors in its business model.
Several other financial firms have also upgraded their outlooks for Astrana Health. BTIG and Baird have both maintained their Buy ratings for the company, raising their price targets to $70.00 and $67.00, respectively. Truist Securities upgraded Astrana Health's stock rating from Hold to Buy, setting a new price target of $50.00, while Stifel maintained its Buy rating, raising its price target to $48.00.
Moreover, Astrana Health has initiated the resale of Earn-Out Shares linked to its acquisition of Asian American Medical (TASE:PMCN) Group (AAMG), providing former AAMG stockholders with the potential to sell shares upon meeting certain performance targets. These recent developments underscore the positive trajectory of Astrana Health in the healthcare management sector.
InvestingPro Insights
Astrana Health's acquisition of Prospect Health aligns with the company's strong financial performance and growth trajectory. According to InvestingPro data, Astrana has demonstrated impressive revenue growth of 22.76% over the last twelve months, with an even more substantial quarterly revenue growth of 39.65% in Q2 2024. This robust growth supports the company's expansion strategy through the Prospect Health acquisition.
InvestingPro Tips highlight that Astrana is trading near its 52-week high and has shown a significant return of 84.28% over the last year. This positive market sentiment reflects investor confidence in the company's strategic decisions, including the recent acquisition announcement.
The company's P/E ratio of 41.03 suggests that investors are willing to pay a premium for Astrana's growth potential. This valuation is further supported by an InvestingPro Tip indicating that Astrana is trading at a low P/E ratio relative to its near-term earnings growth, implying that the market may be undervaluing the company's future prospects.
Astrana's strong financial position, with an operating income margin of 5.99% and a return on assets of 5.84%, positions it well to integrate Prospect Health and potentially realize the anticipated synergies from the merger.
For investors seeking a more comprehensive analysis, InvestingPro offers 13 additional tips for Astrana Health, providing deeper insights into the company's financial health and market position.
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