Churchill Capital Corp III, a special purpose acquisition company (SPAC), and MultiPlan Inc, a healthcare company, have agreed to merge in a deal worth $11 billion. The combined company will be called MultiPlan and will go public.
The transaction will bring to MultiPlan up to $3.7 billion of new equity or equity-linked capital to substantially reduce its debt and fund new value-added services.
The deal represents the largest-ever SPAC merger, said Multiplan parent Hellman & Friedman (H&F). Churchill is run by former Citigroup Inc. banker Michael Klein.
Churchill will contribute up to $1.1 billion of cash raised during its initial public offering in February 2020. Investors have committed to participate in the transaction through PIPE commitments to a $2.6 billion new private capital raise consisting of a $1.3 billion common stock at $10 per share and $1.3 billion of 6 percent interest convertible debt, with a conversion price of $13 per share. The convertible debt provides flexible capital, including a non-cash pay option.
The existing management team of MultiPlan led by CEO Mark Tabak, CFO David Redmond and Chief Revenue Officer Dale White, will continue to lead the business.
Mark Tabak, CEO of MultiPlan, stated, "I'm tremendously proud of the role MultiPlan plays in driving order, efficiency and fairness in healthcare payments. This transaction allows us to create payer value beyond the tech-enabled cost management and payment integrity services we offer today. 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. We will deliver even more value for healthcare payers in particular, but also for their consumers and providers.”
The $3.7 billion raised in this transaction will be used to furnish existing debt, purchase a portion of the equity owned by existing MultiPlan shareholders. The company intends to expand its investment in similar companies and grow organically. It will increase focus data, machine learning and artificial intelligence technologies.
MultiPlan has developed end-to-end innovative healthcare transaction solutions that reduce medical spend, improve payment accuracy and advance their competitive position. MultiPlan has a 40-year experience, national reach, expansive provider network, strong relationships, innovative intellectual property and modern scale technology platform to create value for all stakeholders in the healthcare ecosystem. It delivers approximately $19 billion in medical cost savings on over 135 million claims – bringing savings to payers and consumers alike.
MultiPlan’s platform is used by insurance companies such as UnitedHealth Group Inc. and Cigna Corp. It takes a percentage of savings as revenue-- between 5 cents and 13 cents on the dollar.
Churchill's sponsor will amend the terms of its founder equity to align with the long-term value creation and performance of MultiPlan. A portion of Churchill’s equity will vest only if the share price of the company exceeds $12.50 per share over a period between the first and fifth anniversaries of the closing of the transaction, and have agreed not to transfer unvested equity.
The Boards of Directors of both Churchill and MultiPlan have unanimously approved the proposed transaction. The transaction is expected to be completed by the end of October 2020, subject to approval of stockholders of Churchill and other customary regulations.