(Reuters) - Private equity firm Veritas Capital on Tuesday agreed to buy Cotiviti Holdings Inc COTV.N in a $4.9 billion deal to expand its Verscend healthcare IT business.
Cotiviti’s shares were up 10.5 percent at $44.07 in morning trade, close to the offer price of $44.75 per share.
Atlanta-based Cotiviti, which provides payment accuracy and analytics services to health insurers and other healthcare companies, will combine with Veritas-controlled Verscend Technologies Inc.
“We see this (Verscend) as a natural strategic buyer,” said Leerink analyst Ana Gupte, noting that anti-trust issues with the deal seemed to be manageable at an initial glance.
Cotiviti, which had a market value of $3.71 billion to its last close, debuted at a price of $19 per share in 2016, valuing it at about $1.7 billion.
Private equity firms such as Veritas have been investing more in public companies than at any time since the financial crisis, with a focus on healthcare companies.
KKR & Co (KKR.N) said earlier this month that it would buy Envision Healthcare Corp EVHC.N, one of the biggest U.S. providers of physicians to hospitals, in a deal valued at $5.57 billion.
Cotiviti shareholder Advent International - whose shares represent some 44 percent of the healthcare analytics firm’s voting power - will vote in favor of the deal.
Veritas will assume Cotiviti’s outstanding debt. The company had a long-term debt of $744 million as of March 31.
Goldman Sachs and William Blair were Cotiviti’s financial advisers. Latham & Watkins LLP provided legal counsel.
Skadden, Arps, Slate, Meagher & Flom LLP was Veritas’ legal adviser.
Reporting by Manas Mishra and Ankur Banerjee in Bengaluru; Editing by Maju Samuel and Sai Sachin Ravikumar