Surgery Partners IPO Appears Well Constructed
Surgery Partners Inc. (NASDAQ: SGRY) expects to raise $250 million in its upcoming IPO. Based in Nashville, Tennessee, Surgery Partners operates surgical facilities in the United States together with its subsidiaries.
SGRY will offer 14.285 million shares at an expected price range of $23 to $26. If the underwriters price the IPO at the midpoint of that range, SGRY will have a market capitalization of $1.18 billion.
We previewed the Surgery Partners IPO on our IPO Insights platform last week.
SGRY filed for the IPO on August 17, 2015.
Lead Underwriters: BofA Merrill Lynch, Goldman Sachs, and Jeffries LLC
Underwriters: Citigroup Global Markets, Credit Suisse Securities, Morgan Stanley, Raymond James, RBC Capital Markets, and Stifel Nicolaus & Co.
Business Summary: Operator of Surgical Facilities in the United States
Surgery Partners operates a network of surgical facilities throughout the United States together with its subsidiaries. The company operates through its Ancillary Services, Surgical Facility Services and Optical Services divisions. Its surgical facilities include surgical hospitals and ambulatory surgery centers that offer non-emergency surgical procedures across a variety of specialties, such as general surgery, gastrointestinal, orthopedics, ophthalmology, pain management, cardiology, obstetrics/gynecology, podiatry, plastic surgery, urology, neurology and ENT. In addition, the surgical hospitals offer acute care services, including laboratory, diagnostic, obstetrics, pharmacy, oncology, wound care and physical therapy. Its ancillary services include diagnostic laboratory, urgent care facilities, multi-specialty physician practices, anesthesia services and specialty pharmacy services. The company's optical division operates an optical laboratory that produces eye wear.
Through August 2015, Surgery Partners owned and operated over 100 surgical facilities including 94 ambulatory surgery centers and 5 surgical hospitals in 28 states. On a pro forma basis, nearly 4,000 physicians provided services through Surgery Partners in 2014, and through June 2015, approximately 70 percent of its facilities were multi-specialty focused.
For a full description of Surgery's business see its recent SEC filing here.
Executive Management Highlights
CEO Michael Doyle has been in his position since April 2015. Prior to that, he served as the COO of Surgery Partners LLC. He has held positions of increasing responsibility at Surgery Partners and has been with the company since its inception. He holds a Bachelors degree in Physiotherapy from Dalhousie University in Halifax, Nova Scotia and a Masters of Business Administration from Troy State University in Alabama.
CFO Teresa Sparks has held her position since April 2015. She was previously CFO and SVP at Surgery Partners LLC since August 2007. She has served in executive positions at Symbion, HealthWise of America, and Deloitte & Touche LLP. Ms. Sparks is a Certified Public Accountant (inactive) and holds a BS in Accounting and Business Administration from Trevecca Nazarene University.
Potential Competition: AmSurg and Surgical Care Affiliates
Currently, Surgery Partners is the second largest operator of ambulatory surgical centers in the United States by revenue. AmSurg Corporation and Surgical Care Affiliates are the other largest operators. Other competitors include United Surgical Partners, HCA Inc., Symbion Healthcare, NovaMed, Ambulatory Surgical Centers of America, Southwestern Eye Center, and Physicians Endoscopy Inc.
Financial Overview: Healthy Top, Bottom Lines
Surgery Partners provided the following figures from its financial documents for the six months ended June 30:
2015 |
2014 |
|
Revenue |
$456,970,000 |
$147,294,000 |
Net Income |
$22,963,000 |
$9,283,000 |
Balance Sheet Details:
Assets |
$1,848,148,000 |
Total Liabilities |
$1,634,993,000 |
Stockholders' Equity |
($273,333,000) |
Conclusion: Consider Buying In
We like this healthcare deal, its business growth, and powerful underwriters. While some show concern over the lack of liquidity in the space at present, over 6 healthcare public offerings in 2015 have brought avg. first-day returns of 19.5%. These numbers are attractive.
We suggest considering a small allocation.
Disclosure: None.