IPO Report: Surgery Partners (SGRY)

Francis Gaskins |

Surgery Partners (SRGY) IPO, Surgery Partners (SRGY) IPO price, Surgery Partners (SRGY) IPO date, stocks to buy now, IPOs this week, small-cap stocksSurgery Partners (SGRY) is a leading healthcare services company with a differentiated outpatient delivery model focused on providing high quality, cost effective solutions for surgical and related ancillary care in support of SGRY’s patients and physicians. The company is based in Nashville, TN.

Five other companies are scheduled for the week of Sept. 28. The full IPO calendar is available at IPO Premium.

SEC Documents

Manager, Joint-managers: BofA Merrill Lynch, Goldman Sachs, Jefferies
Co-managers: Citigroup, Morgan Stanley, Credit Suisse, Raymond James, RBC Capital Markets/ Stifel

End of lockup (180 days): Tuesday, March 29, 2016
End of 10-day quiet period: Sunday, October 11, 2015

Analyst report estimate:  neutral plus

SGRY scheduled a $250 million IPO with a market capitalization of $1.18 billion at a price range midpoint of $24.50 for Thursday, Oct. 1, 2015 on Nasdaq.  Priced at $19

Surgery Partners (SGRY) IPO Summary

SGRY is a leading healthcare services company with a differentiated outpatient delivery model focused on providing high quality, cost effective solutions for surgical and related ancillary care in support of SGRY’s patients and physicians.

Founded in 2004, SGRY is now one of the largest and fastest growing surgical services businesses in the country.

Surgery Partners (SGRY) Valuation

Pre-IPO grade-score summary
Many IPOs in today’s environment are graded C+ and scored 7.
If the pre-IPO grade is below C+ or the score is below 7,
then our analysts may have some concerns about the company’s
outlook and/or its market segment.
If the pre-ipo grade is above C+ or the score is above 7,
then our analysts believe the company’s overall business outlook is very favorable.
C = unprofitable, C+ = profitable

Accumulated deficit (mm)





Per share dilution





Valuation Ratios

Mrkt Cap (mm)

Price /Sls

Price /Erngs*

Price /BkVlue

Price /TanBV

% offered in IPO

Surgery Partners (SGRY)







Annualizing June 6 mos






Institutons own

Amsurg (AMSG)







Surgical Care Affiliates (SCAI)








*Before minority or redeemable non-controlling (partnership) interests


Surgery Partners (SGRY) IPO Conclusion

Neutral plus, C+, 7

Industry leading same-facility revenue growth

1.3 price to sales, lower than AMSG (1.7) and SCAI (1.6)

P/E of 15.9, higher than AMSG (12.6) and SCAI (11.7)
(earnings before minority or redeemable non-controlling, partnership, interests)

Positive price to tangible bk value of 4, (AMSG is -1.3 and SCAI is -1.9)

31% gross profit, 8% net income

Institutions own about 100% of AMSG & SCAI
(so SGRY is similarly an institutional stock)

Per share dilution is -$42, IPO mid-range is $24.50

Surgery Partners (SGRY) Business

SGRY is a leading healthcare services company with a differentiated outpatient delivery model focused on providing high quality, cost effective solutions for surgical and related ancillary care in support of SGRY’s patients and physicians.

Founded in 2004, SGRY is now one of the largest and fastest growing surgical services businesses in the country.

As of August 17, 2015, SGRY owned or operated, primarily in partnership with physicians, a portfolio of 99 surgical facilities comprised of 94 ambulatory surgery centers (“ASCs” or “surgery centers”) and five surgical hospitals (“surgical hospitals,” and together with ASCs referred to as “surgical facilities” or “facilities”) across 28 states.

On a pro forma basis, in 2014, over 4,000 physicians provided services to over 500,000 patients in SGRY’s facilities, and as of June 30, 2015, approximately 70% of these facilities were multi-specialty focused.

SGRY’s innovative strategy provides a suite of targeted and complementary ancillary services in support of its patients and physicians.

Ancillary Services

SGRY’s suite of ancillary services is comprised of a diagnostic laboratory, multi-specialty physician practices, urgent care facilities, anesthesia services, optical services and specialty pharmacy services.

SGRY believes this approach improves the quality of care provided to its patients, results in superior clinical outcomes and allows us to realize the revenue associated with these Ancillary Services that are otherwise outsourced to unrelated third-party providers.

Industry Leading Same-Facility Revenue Growth

Driven by an experienced and innovative management team, the implementation of SGRY’s differentiated strategy resulted in industry leading same-facility revenue growth of approximately 9% during 2014, and an average of approximately 8% annually on a pro forma basis from 2012 to 2014.

SGRY’s patient- and physician-centric culture, its commitment to high quality care, its differentiated approach to physician engagement and its suite of complementary Ancillary Services have been instrumental to its growth.

These areas of focus, along with investments in systems and processes, strategic acquisitions and favorable industry trends, have all contributed to SGRY’s industry leading track record of growth.

Symbion Acquisition

SGRY’s transformational acquisition of Symbion in November of 2014, a private owner and operator of 55 surgical facilities at the time of the acquisition, has further diversified SGRY’s geographic footprint, surgical specialty mix and ancillary network, while significantly enhancing SGRY’s scale and providing significant cost and revenue synergy opportunities that SGRY believes it is positioned to achieve over the next two to three years.

To that end, SGRY has been actively executing its integration plan to realize these synergies, which include reductions in corporate overhead, supply chain rationalization, enhanced physician engagement, improved payor contracting and revenue synergies associated with rolling out its suite of Ancillary Services throughout the Symbion portfolio.

Without giving effect to the Symbion acquisition, SGRY would have derived approximately 27% of its 2014 revenue from its Ancillary Services.

On a pro forma basis, approximately 10% of SGRY’s revenue for that same period was derived from these same services, a percentage that SGRY will focus on increasing as SGRY continues to deploy its Ancillary Services offerings.

Surgery Partners (SGRY) Intellectual Property

SGRY owns or has rights to trademarks or trade names that SGRY uses in connection with the operation of its business, including its corporate names, tag-lines, logos and website names. In addition, SGRY owns or has the rights to copyrights, trade secrets and other proprietary rights that protect the content of SGRY’s products and the formulations for such products. Solely for convenience, some of the copyrights, trade names and trademarks referred to in this prospectus are listed without their ©, ® and ™ symbols, but SGRY will assert, to the fullest extent under applicable law, its rights to its copyrights, trade names and trademarks.

Surgery Partners (SGRY) Competition

In each of its markets SGRY faces competition from other providers of patient care in undertaking joint ventures, completing strategic acquisitions, attracting patients and negotiating payor contract pricing.

Among ASC operators in the United States that primarily focus on ASC operations, SGRY is the second largest by revenue, based on its 2014 pro forma revenue. AmSurg Corp. and Surgical Care Affiliates, Inc. are the other largest national ASC operators.

SGRY excludes HCA Healthcare Corporation and Tenet Healthcare Corporation (which recently acquired United Surgical Partners, Inc.) from its list of direct competitors because they operate ASCs as part of a larger hospital operations business.

Due to industry fragmentation, SGRY commonly compete for business with hospitals partnering with physicians or with local physician groups who develop independent ASCs without a corporate partner.

SGRY believes it competes effectively because of its size, quality of its management services, experience, offering of Ancillary Services and reputation for providing quality care.

Surgery Partners (SGRY) 5% Shareholders Pre-IPO

Michael T. Doyle           9.4%

An entity affiliated with H.I.G. Capital, LLC          81.8%

Surgery Partners (SGRY) Dividends

No dividends are planned.

Surgery Partners (SGRY) IPO Use of Proceeds

SGRY expects to receive $325 million from its IPO and use it for the following:

to repay a portion of the borrowings outstanding under its Second Lien Term Loan and to pay fees and expenses associated with this offering.



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Symbol Name Price Change % Volume
SGRY Surgery Partners Inc. 16.00 -0.45 -2.74 86,269 Trade


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