The hedge fund pushing for major strategic and leadership changes at Healthways has stated its case for spinning out its successful senior fitness program, saying that division is likely worth more than the full company's current market value.
In a slide deck finalized last week, the North Tide Capital team — which owns 11 percent of Franklin-based Healthways — estimates that SilverSneakers generates about $300 million in revenues annually, almost double the number when Healthways acquired its operator, Axia Healthcare, in late 2006. From there, manager Conan Laughlin and his group estimate the 11 million-member business is producing EBITDA of about $108 million — check their math here — which leds them to an enterprise value estimate of almost $1.1 billion, or $24 per share. Healthways stock (Ticker: HWAY) was changing hands around $16.75 in mid-day trading Monday.
Healthways officials, however, say Laughlin is far off base.
"We believe North Tide’s analysis is deeply flawed and that its proposals would take the company in the wrong direction," the company said in a statement. "We will be communicating with shareholders in due course and look forward to detailing why these proposals are not in the best interests of Healthways, our customers or shareholders."
Laughlin's presentation comes a few weeks ahead of the company's annual shareholders' meeting later this spring. North Tide has nominated Laughlin and three others — including former CaremarkRx boss Mac Crawford — to fill spots on the 11-member board.
"We believe SilverSneakers has been one of the few success stories at Healthways over the past decade, and its value to shareholders is greatly underappreciated," Laughlin and his team wrote in their presentation.
In stating his case — read the full presentation here — Laughlin also says SilverSneakers would be relatively easy to sell off because it is "a highly distinct and separable business" from Healthways' core wellness programs, in part because it is based in Chandler, Ariz. If elected to the board, he and his fellow activists plan to "address immediately" the question of how to monetize that business.
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