Recently, it was learned through foreign media information that Tivity Health, a leading fitness and health improvement solution provider in the United States, will acquire Nutrisystem, a company that provides weight management products and services, for $1.3 billion.
The two companies announced on December 10 that they had signed a definitive agreement under which Tivity Health would acquire all of Nutrisystem's issued shares in cash and stock. Under the terms of the agreement unanimously approved by the board of directors of the two companies, Nutrisystem shareholders will receive $38.75 in cash and 0.2141 shares of Tivity Health for each share of Nutrisystem common stock.
The deal has a corporate value of $1.3 billion for Nutrisystem and a share value of $1.4 billion, or about $47 per share. The implied stock price of $8.25 per share is based on the volume-weighted average price of the 10-day Tivity Health stock as of December 3, 2018. Based on the volume-weighted average price of Nutrisystem's past five trading days, the implied transaction price of $47 per share represents a 30% premium. At the end of the transaction, Tivity Health's shareholders are expected to hold approximately 87% of the shares of Nutrisystem.
Founded in 1972, NutriSystem is a company that specializes in marketing and providing weight management systems. The company sells weight management programs through the Internet and telephone, as well as direct-to-consumer sales and distribution.
NutriSystem went public in 2000 and went bankrupt in 2002. Subsequently, Michael Hagan raised nearly $10 million and acquired a 59% stake in NutriSystem, becoming the new owner of Michael Hagan. In 2002, NutriSystem created a myth that three years of profit growth of 70 times and stock prices rose by 30 times. In early 2008, the company was named "the cheapest weight loss project" by Forbes magazine.
NutriSystem was founded only to provide weight loss consultation and a small number of products, and later transformed into a comprehensive weight loss diet health management company. In 2009, it started working with member warehouse club Costco. In 2012, it cooperated with grocery retailer Kroger to provide breakfast service. In 2013, it cooperated with Wal-Mart to provide 5-day Jumpstart diet recipe. In 2015, NutriSystem acquired South Beach Diet, a company that provides a healthy diet for weight loss, and became the owner of the brand.
Currently, NutriSystem helps women, men and seniors in the United States to manage their weight and health through multiple weight loss brands.
The combined company will provide a comprehensive portfolio of fitness, nutrition and social engagement solutions on a large scale, and through this expanded product portfolio, Tivity Health will be better able to address weight management issues that cause many chronic conditions. Tiver Health's portfolio diversification and scale-up will benefit all of the company's stakeholders, including health plans, fitness partners, members and consumers, as these products support a healthier lifestyle and lower healthcare costs.
The two companies said that the combination of Tivity Health and Nutrisystem's strong marketing capabilities and data analytics expertise will enable the combined company to increase awareness among all consumer groups and increase membership and engagement. The transaction will also create value for Tivity Health's shareholders by adding new sources of independent revenue, cost and revenue synergies, and huge potential growth opportunities.
Based on the 12-month financial results of the two companies as of September 30, 2018, revenue is expected to be approximately $1.3 billion and net profit is approximately $135 million. Adjusted EBITDA (before interest, taxes, depreciation and amortization) Profit) is approximately $223 million.
Upon completion of the acquisition, Tivity Health expects to maintain all existing Nutrisystem brands. In addition, Nutrisystem CEO Dawn Zier will become the President and Chief Operating Officer of Tivity Health and join the company's board of directors. She will be responsible for Tivity Health's nutrition and fitness department and will report to the company's CEO, Donato Tramuto.
Tivity Health will fund the cash portion of the acquisition through a fully committed term loan and existing cash from Credit Suisse. At the completion of the transaction, Tivity Health's estimated net leverage is expected to be approximately 4.4 times, including confirmed cost synergies. Tivity Health expects the company's net leverage to fall below 3.5 times by the end of 2020 and will be less than 2.5 times by the end of 2021.
The acquisition was conducted by Credit Suisse as the exclusive financial advisor to Tivity Health and Bass and Berry & Sims PLC as legal advisors. Evercore is the exclusive financial advisor to Nutrisystem and Davis Polk & Wardwell LLP is a legal advisor.
The transaction is expected to be completed in the first quarter of 2019, subject to approval by Nutrisystem shareholders, regulatory authorities and other customary closing conditions.
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