Accretive Health and Ascension, faith-based healthcare organization have announced a long-term strategic partnership to renew, revise and expand their existing services agreement for a 10-year term. As part of the agreement, Ascension will serve as Accretive Health’s sole revenue cycle provider to cover all of Ascension’s net patient revenue (NPR).
In addition, a newly formed investment vehicle owned by Ascension and TowerBrook Capital Partners has entered into a definitive agreement under which Ascension and TowerBrook will invest $200 million in Accretive to purchase convertible preferred stock and receive warrants. The transaction is expected to be completed in the first quarter of 2016.
Here are Transaction Details
Here are six things to know about the renewed 10 year partnership agreement:
1. The Ascension/TowerBrook investment vehicle will purchase $200 million of convertible preferred stock, which is convertible into shares of Accretive common stock at $2.50 per share.
2. The preferred stock carries an 8.0% annual dividend, payable on a quarterly basis in kind for the first seven years and in cash thereafter.
3. On an as-converted basis at the close of the transaction, the preferred stock will represent approximately 44% of Accretive’s shares outstanding.
4. The preferred stock will vote on an as-converted basis with the common stock as a single class.
5. Accretive will issue to the Ascension/TowerBrook investment vehicle warrants to acquire up to an additional 60 million shares of Accretive Health common stock at an exercise price of $3.50 per share; the warrants will have a 10-year term and can be exercised on a cash or cashless basis.
6. Accretive Health intends to use the proceeds of the sale of the convertible preferred stock, which will add to the company’s existing debt free balance sheet, opportunistically to fund infrastructure investments and growth initiatives, to cover transaction costs and for general corporate purposes.
Targeted growth initiatives may include opportunistic acquisitions which could include both books of business to enhance scale as well as new and developing technologies as this market evolves.
The transaction is expected to close in the first quarter of 2016 and is subject to customary closing conditions and regulatory approval.