AmSurg Corp., a provider of outsourced physician services to hospitals and others, is seeking to combine with Team Health Holdings Inc. in an effort to gain scale amid a wave of consolidation in the health-care industry.

In an Oct. 12 letter to Team Health's board, AmSurg Chief Executive Christopher Holden proposed a stock-and-cash merger of the companies that would currently value Team Health at $71.47 a share, or more than $5 billion. Shareholders of Team Health would receive $11.49 a share in cash, according to a copy of the letter that was viewed by The Wall Street Journal.

The per-share price would represent a premium of 36% over Knoxville, Tenn.-based Team Health's closing price of $52.50 Monday.

Team Health, which is seeking to complete an acquisition it announced in August, rebuffed the offer, according to people familiar with the matter. AmSurg, of Nashville, Tenn., now plans to go public with the offer in an effort to put pressure on Team Health to negotiate a deal. There is significant shareholder overlap between the two companies, which could aid in that effort, the people said.

Team Health officials couldn't immediately be reached for comment.

The combined company's ownership would be split 50-50 between the two sets of shareholders.

Each company currently has a market capitalization of about $3.8 billion, and combining them would create a major national provider of outsourced physician services, with a network of more than 1,200 hospitals and about 20,000 doctors. It would have a big presence in areas including anesthesia, emergency services, radiology and neonatology. AmSurg is a big player in so-called ambulatory surgery, with roughly 250 facilities that perform procedures that don't require an overnight stay.

Consolidation waves have swept through both the hospital and health-insurance industries, part of a broader surge in deal making in health-care and other sectors of the economy in recent years. That has put pressure on companies like AmSurg to seek tie ups that will enable them to maintain the size and scope they need to keep up with customers, rivals and suppliers.

AmSurg expects that a combination with Team Health—which the resulting company would be named—would generate $200 million to $290 million in annual synergies, both from cost reductions and revenue enhancements.

Team Health in August agreed to buy another outsourced-services provider, IPC Healthcare Inc., for about $1.4 billion.

AmSurg is in favor of the deal and wants Team Health to complete it, but believes that financing it as part of a broader three-way merger could save between $100 million and $150 million because otherwise debt for the IPC deal would need to be refinanced, the people said.

"If you were not to engage with us now in a collaborative way, it could possibly sub-optimize the capital structure of a combination with AmSurg in the future—or worse—result in the loss of this opportunity completely," the letter reads.

AmSurg believes that experience it gained from buying Sheridan Healthcare Inc. for about $2.3 billion 2014 would help it successfully meld the three companies, according to the letter.

Write to Dana Cimilluca at dana.cimilluca@wsj.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

(END) Dow Jones Newswires

October 20, 2015 07:05 ET (11:05 GMT)

Copyright (c) 2015 Dow Jones & Company, Inc.
Amsurg Corp. (NASDAQ:AMSG)
Historical Stock Chart
From Oct 2024 to Nov 2024 Click Here for more Amsurg Corp. Charts.
Amsurg Corp. (NASDAQ:AMSG)
Historical Stock Chart
From Nov 2023 to Nov 2024 Click Here for more Amsurg Corp. Charts.