Tivity Health, Inc. (TVTY) Announces Acquisition of Nutrisystem (NTRI) for $1.3B

December 10, 2018 6:03 AM EST

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Tivity Health, Inc. (NASDAQ: TVTY) and Nutrisystem, Inc. (NASDAQ: NTRI) today announced that they have entered into a definitive agreement under which Tivity Health will acquire all of the outstanding shares of Nutrisystem for a combination of cash and stock. Under the terms of the agreement, which has been unanimously approved by the Boards of Directors of both companies, Nutrisystem shareholders will receive $38.75 per share in cash and 0.2141 Tivity Health shares for each share of Nutrisystem common stock. The transaction values Nutrisystem at an enterprise value of $1.3 billion and an equity value of $1.4 billion, or approximately $47.00 per share. The implied stock consideration of $8.25 per Nutrisystem share is based on the volume-weighted average price of Tivity Health's stock for the 10 days ended December 3, 2018. The implied transaction consideration of $47.00 per share represents a 30% premium based on the volume-weighted average price for Nutrisystem over the last five trading days.

The combined company will be unique in offering, at scale, an integrated portfolio of fitness, nutrition and social engagement solutions to support overall health and wellness. Through this expanded portfolio, Tivity Health will be better positioned to address weight management – a major factor contributing to many chronic diseases. The diversification of Tivity Health's portfolio and increased scale will benefit all the company's stakeholders – including health plans, fitness partners, members and consumers – as these offerings support healthier lifestyles and can lower medical costs. Tens of millions of Americans are currently eligible for Tivity Health's SilverSneakers®, Prime® Fitness, WholeHealth Living™and flip50™ programs, and millions of people have lost weight with Nutrisystem's products, including Nutrisystem®, South Beach Diet® and DNA BodyBlueprint™.

This transaction will also create meaningful value for Tivity Health's shareholders through the addition of a new independent revenue stream, cost and revenue synergies, and significant potential growth opportunities. The combination of Tivity Health's and Nutrisystem's highly trusted brands and strong marketing and data analytics expertise will allow the combined company to increase awareness and member enrollment and engagement across all consumer audiences. The acquisition of Nutrisystem will further elevate Tivity Health as a leading health and wellness company offering comprehensive fitness, nutrition and social engagement solutions. Based on the financial results for both companies for the 12 months ended September 30, 2018, pro forma revenue would have been approximately $1.3 billion, net income would have been approximately $135 million and adjusted EBITDA would have been approximately $223 million. See the table appended to this release for a reconciliation of non-GAAP financial measures.

"The acquisition of Nutrisystem is an exciting and transformational event for Tivity Health as we expand our portfolio of healthy lifestyle brands," said Donato Tramuto, Tivity Health's Chief Executive Officer. "Tivity Health and Nutrisystem share the same mission-driven culture and have highly talented, motivated colleagues. Tivity Health has the opportunity to accelerate its already impressive growth with the addition of Nutrisystem. Our combined platform has the potential to attract new users, increase enrollment, and enhance engagement among the loyal customers and members of both companies. Many of the most common chronic conditions afflicting Americans today are associated with weight management, nutrition and physical fitness, and addressing both calories in and calories out is an important part of alleviating those conditions. Today, Tivity Health manages calories out with our SilverSneakers®, Prime® Fitness and flip50 programs; and Nutrisystem manages calories in with its weight loss solutions. We believe combining our two companies will create entirely new value propositions for our health plans, fitness partners, members and consumers."

"Today marks an important milestone in Nutrisystem's 45-year history, as through this transaction, we will become part of a leading health and wellness company that will offer a broad range of nutrition, fitness and social engagement solutions to our customers. This transaction will provide our shareholders with significant value and the opportunity to participate in the upside potential of the combined company through ownership of Tivity Health stock," said Dawn Zier, President and Chief Executive Officer of Nutrisystem. "Tivity Health and Nutrisystem share a common strategic vision, mission and culture, and we look forward to working with the Tivity Health team to take the combined organization to the next level."

Upon closing of the acquisition, Tivity Health expects to maintain all existing Nutrisystem brands, as well as Nutrisystem's Fort Washington, PA location. Additionally, Dawn Zier will become President and Chief Operating Officer of Tivity Health reporting to Tivity Health CEO Donato Tramuto. She will be responsible for Tivity Health's nutrition and fitness divisions and will join the company's Board of Directors.

Transaction Details

Under the terms of the merger agreement, each outstanding share of Nutrisystem stock will be exchanged for $38.75 in cash and 0.2141 shares of Tivity Health common stock. Upon closing, Tivity Health shareholders are expected to own approximately 87% of the pro forma company on a fully diluted basis.

Tivity Health will finance the cash portion of the acquisition with fully committed term loan financing from Credit Suisse and existing cash on hand. At the closing of the transaction, Tivity Health's pro forma net leverage is expected to be approximately 4.4x, including the benefit of identified cost synergies. Tivity Health expects to reduce net leverage to less than 3.5x by the end of 2020, and less than 2.5x by the end of 2021.

The transaction is expected to close in the first quarter of 2019, subject to the approval of Nutrisystem shareholders, the receipt of regulatory approval and other customary closing conditions.

Advisors

Credit Suisse acted as exclusive financial advisor to Tivity Health and Bass, Berry & Sims PLC served as legal counsel. Evercore acted as exclusive financial advisor to Nutrisystem and Davis Polk & Wardwell LLP served as legal counsel.



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