Exclusive-Evolent Health in sale talks after receiving takeover interest, sources say

By Milana Vinn and Anirban Sen

NEW YORK (Reuters) - Evolent Health is in talks with private equity firms and healthcare services providers for a potential sale, in a process that kicked off after it received takeover interest, people familiar with the matter said on Thursday.

Private equity firms TPG, CD&R and KKR are among the parties that have expressed interest in a deal for healthcare software provider Evolent, which has a market value of about $3.8 billion, the sources said. TPG was one of the early investors in Evolent.

Health insurer Elevance Health is also among the bidders and could team up with a private equity firm to acquire Evolent, the sources added.

Evolent's shares jumped more than 18% on the news on Thursday. The shares, which have been trading in New York since the company's initial public offering in 2015, had declined about 14% from the start of the year until Wednesday's close.

Evolent, CD&R and Elevance did not immediately respond to requests for comment. KKR and TPG declined to comment.

Evolent, which is working with a financial adviser on the sale process that kicked off a few months ago, has received initial bids, the sources said. They added that a deal could be reached in the next few weeks.

The sources, who requested anonymity as the discussions are confidential, cautioned that a deal may not materialize.

Evolent, which has partnerships with healthcare providers and health insurers like Humana, is a maker of software that enables them to migrate from fee-for-service reimbursement models towards value-based care models. In a value-based model, doctors and healthcare providers are reimbursed based on the quality of care they provide.

Evolent was founded in 2011 by UPMC Health Plan, which operates one of the largest U.S. provider-owned health plans, and The Advisory Board Company, which provides technology tools to hospitals and healthcare providers.

The company reported a 38% jump in revenue while its losses narrowed in its most recent quarter, but results fell short of market expectations as it was hurt by lower billing rates from its healthcare payer customers.

Activist investor Engaged Capital took a sizable stake in Evolent in 2020 and pushed the company to explore options to boost shareholder value. Engaged eventually entered into a settlement with the company that resulted in the creation of a strategy committee focused on "value creation initiatives."

Evolent has previously attracted takeover interest. In 2021, Bloomberg reported that Walgreens was weighing a deal for Evolent.

(Reporting by Milana Vinn and Anirban Sen in New York; Editing by Paritosh Bansal and Nick Zieminski)