Astrana Health (ASTH) M&A Announcement summary

Deal rationale and strategic fit

• Acquisition expands provider network into new and adjacent markets, including Orange County, San Diego, San Antonio, and Rhode Island, enhancing access and quality for members.

• Adds 610,000 value-based care members, bringing the combined entity to 1.7 million across 13 states, with a payer-agnostic, multi-line business model.

• Acquisition includes a restricted Knox-Keene Plan, medical groups, a management service organization, a pharmacy, and an acute care hospital, supporting integrated care delivery.

• Shared culture and mission to provide affordable, accessible, patient-centered care tailored to local communities.

• Partnership aims to keep healthcare local and personalized across four states.

Financial terms and conditions

• Purchase price is $745 million, funded by cash on hand and a $1.095 billion, 364-day bridge loan from Truist Bank and JPMorgan.

• Prospect is expected to generate $1.2 billion in revenue and $81 million in adjusted EBITDA for 2024, reflecting a 9x EBITDA multiple.

• Pro forma net leverage at close is projected at 3.4x, with a target to reduce to under 2.5x within 24 months, driven by EBITDA growth and cash flow.

• Free cash flow for the acquired business is expected to be $50–$60 million in 2025.

Synergies and expected cost savings

• $12 million in synergies targeted by 2027, with opportunities on both revenue and operational sides as ecosystems are combined.

• Clear financial and operational synergies anticipated due to strong cultural alignment and cohesive missions.

• Astrana plans significant investments in Prospect's infrastructure to enhance care access and quality.

• Further upside anticipated from operational efficiencies and risk arrangement synergies over time.