Evolent Health, Inc. (NYSE: EVH) and Valence Health, Inc. ("Valence Health") announced today that they have entered into a definitive agreement for Evolent to acquire the majority of Valence Health's business for approximately $145 million.

The combination of Evolent and Valence Health brings together two innovative companies that serve health care providers in the transition to value-based care. Evolent was founded in 2011 to support providers in moving to a population health model of care delivery and to successfully manage performance-based payment arrangements. Valence Health, based in Chicago, IL, was founded in 1996 and provides value-based administration, population health and advisory services. In its 20 year history, Valence Health has developed particular expertise in the Medicaid and pediatric markets, and today supports approximately 600,000 lives across 10 long-term operating partners.

"By adding Valence Health's services to Evolent, we expect to strengthen our operational capabilities and expertise, expanding our ability to support provider organizations in delivering higher quality, lower cost care," said Evolent CEO Frank Williams. "Strategically, we have tightly aligned visions of improving health care through innovative technology and services that help providers succeed as the industry continues its adoption of value-based payment models. Practically, we expect the addition of Valence Health's talented team and their experience in value-based administration will advance our ability to drive results for a broader set of clients, providers and patients. We are looking forward to welcoming Valence Health employees and clients to the Evolent team."

Valence Health CEO R. Andrew Eckert expressed his excitement, saying, "Our two organizations are culturally and operationally aligned to deliver robust value-based administration and services to health care providers. Combining our team's 20 years of clinical and strategic experience with Evolent's proven innovations in value-based care will allow us to better serve our clients with best-in-class technology, clinical models and administrative service capabilities."

Strategic RationaleTogether, the organizations will be able to offer comprehensive services and technology across a variety of populations and will serve more than 1.8 million lives across 23 long-term operating partners at closing, comprised of provider-sponsored health plans, accountable care organizations and full-risk entities.

"The addition of the Valence Health business will provide increased scale and client diversification, and we expect it to accelerate our target timeline to Adjusted EBITDA break-even in 2017 by one to two quarters," said Evolent CEO Frank Williams. "We believe this transaction will strengthen our business strategically and financially and position it for continued growth well into the future."

Transaction DetailsThe purchase price is approximately $145 million based on the closing price of Evolent's Class A common stock on the New York Stock Exchange on July 12, 2016, and consists of 5.84 million shares of Evolent Class A common stock and $35 million in cash. The transaction also includes an earn-out of up to $50 million, payable in Evolent Class A common stock, tied to future new business activity. Shares to be issued in relation to the earn-out are limited to 3.9 million shares with full payment to be made by December 31, 2016. The shares at closing and in the earn-out will be issued in transactions exempt from registration under the Securities Act of 1933, as amended. Evolent expects the acquired business, on a standalone basis, to generate revenues of approximately $80-85 million for the year ending December 31, 2016; however, Evolent will consolidate the results of the acquired business only for the period subsequent to the close of the transaction. The companies expect the transaction to close within the next 120 days, subject to regulatory approvals and certain closing conditions set forth in the agreement.

Under the terms of the agreement, Evolent will acquire the majority of Valence Health's business, excluding its contracts serving state insurance cooperatives; the state insurance cooperative contracts will be transferred to a separate entity that will maintain operations as they currently exist today, which will be owned by Valence shareholders.

GuidanceBased on knowledge of performance through July 12, 2016, Evolent expects to meet or exceed our previously provided guidance for the second quarter and full year 2016.

The acquisition has been unanimously approved by the boards of directors of both companies. Frank Williams will remain as Chief Executive Officer of the combined organization. There will be no change in composition of the Evolent Board of Directors.

AdvisorsJ.P. Morgan Securities LLC is acting as exclusive financial advisor to Valence Health and Latham & Watkins LLP is acting as its legal counsel. Bass, Berry & Sims PLC is acting as legal counsel to Evolent.

Conference Call and Webcast DetailsEvolent will hold a conference call to discuss details of the transaction today, July 13, 2016, at 8:00 a.m., Eastern Time. The conference call will be available via live webcast on the company's Investor Relations website at http://ir.evolenthealth.com. To participate by telephone, dial 1.888.317.6016 and ask to join to the Evolent call. Participants are advised to dial in at least 15 minutes prior to the call to register. The call will be archived on the company's website for 90 days and will be available beginning later this evening. Evolent invites all interested parties to attend the conference call.