US healthcare company MultiPlan is to go public in an $11bn merger with a special purpose acquisition company run by former Citigroup dealmaker Michael Klein.
Churchill Capital Corp III, which raised $1.1bn in February, will merge with MultiPlan in one of the largest deals executed by a “blank cheque” buyout fund.
The healthcare technology provider is owned by private equity firm Hellman & Friedman, which will remain its largest shareholder.
The deal shows how Spacs are increasingly competing for big deals while providing an alternative to traditional initial public offerings.
As part of the $11bn transaction, which includes debt, MultiPlan will receive a $3.7bn cash infusion that involves $2.6bn of investor commitments in equity and convertible debt. The company said it would use the capital to pay down debt, purchase shares from existing investors and bolster its balance sheet. Longtime chief executive Mark Tabak will remain in his post.
“As a public company, MultiPlan will have greater strategic and financial flexibility, making it better equipped to expand organically, through adjacent acquisitions and by investing in new technologies,” Mr Tabak said in a statement. “We will deliver even more value for healthcare payers in particular, but also for their consumers and providers.”
MultiPlan’s business identifies cost reductions in healthcare plans for insurance providers and takes a cut of those savings.
The company projected it would make $860m in adjusted earnings before interest, taxes depreciation and amortisation on revenues of $1.1bn in 2021, according to a shareholder presentation.
Hellman & Friedman agreed to buy MultiPlan in 2016 for $7.5bn from Starr Investment Holdings and Partners Group. The company, which has been under private equity ownership since 2006 when it was acquired by The Carlyle Group for $1bn, has a heavy debt load.
The San Francisco-based private equity firm and its co-investors will retain a 62 per cent stake in the company. Hellman & Friedman is subject to a six-month lock up period before it can sell its shares.
Spacs have experienced a resurgence in popularity, raising a record $13.4bn in proceeds last year, according to Dealogic data. The blank cheque buyout funds pull in investor capital by listing as a public company and then put the funds to use once a target acquisition is identified. For shareholders, they effectively amount to wagers on the acumen of the sponsoring dealmakers.
Bill Ackman, the hedge fund manager, is aiming to raise the largest Spac in history this week, targeting up to $6.5bn for his Pershing Square Tontine Holdings vehicle.
Mr Klein, who headed the institutional clients practice at Citigroup before leaving to start the advisory firm M Klein & Co, is also seeking an acquisition target for his Churchill Capital Corp II Spac. His first Churchill vehicle took the data company Clarivate Analytics public last year in a $4.2bn deal.
The MultiPlan transaction is expected to be completed by October, pending approval from Churchill’s stockholders.