Categories Earnings, Health Care

Tivity Health set to redefine fitness market with Nutrisystem acquisition

The fitness industry has witnessed a lot of innovation in recent times as companies strive to cash in on the growing penchant for physical wellness among Americans, especially the youth. Tivity Health (TVTY), a leading provider of fitness and weight-loss programs, is trying to set a new trend by including dietary supplements and health foods to its services.

In a move that is expected to create significant shareholder value, Tivity this week agreed to acquire Nutrisystem (NTRI), a provider of packaged diet foods, for $1.3 billion. The $47-per share deal price represents a reasonably good valuation. While ensuring annual cost savings, the acquisition is expected to be accretive to Tivity’s earnings within two years after the completion. Moreover, the projected improvement in cash flow, from the positive synergies, will strengthen its balance sheet.

“Tivity Health has the opportunity to accelerate its already impressive growth with the addition of Nutrisystem,” said Tivity CEO Donato Tramuto.

The estimated improvement in cash flow, from the positive synergies, is expected to strengthen the company’s balance sheet

The market witnessed hectic activity Monday morning when Nutrisystem shares gained about 31% in premarket trading.  Hovering near the $45-mark, the stock recouped most of the losses it suffered since the beginning of the year. It had been keeping a low profile after retreating from the peak last year.

Meanwhile, the news triggered a selloff and Tivity shares lost about 34% soon after trading started. The stock had gained about 12% since the beginning of the year and maintained a steady uptrend since mid-October after hitting a one-year low.

Fitbit recovers top line in Q3 as fight with Apple Watch intensifies

Maybe it is the first time customers and partners are being offered nutrition, fitness and social engagement solutions under a single brand. The health food portfolio of Nutrisystem will be incorporated into the various fitness programs of Tivity, including SilverSneakers and Prime Fitness. After integration, as much as 87% of the new entity will be owned by the Tivity shareholders.

“We believe combining our two companies will create entirely new value propositions for our health plans, fitness partners, members and consumers,” added Tramuto. The transaction, to be financed with existing cash-on-hand and term loan, is tentatively scheduled to close in the first quarter of next year.

 

We’re on Flipboard! Follow us to receive the latest stock market, earnings and financial news at your fingertips

Most Popular

United Parcel Service (UPS) seems on track to regain lost strength

Cargo giant United Parcel Service, Inc. (NYSE: UPS) ended fiscal 2023 on a weak note, reporting lower revenues and profit for the fourth quarter. The company experienced a slowdown post-pandemic

IPO Alert: What to look for when Boundless Bio goes public

Boundless Bio is preparing to debut on the Nasdaq stock market this week, and become the latest addition to the list of biotech firms that have launched IPOs this year.

Nike (NKE) bets on innovation and partnerships to return to high growth

Sneaker giant Nike, Inc. (NYSE: NKE) has been going through a rough patch for some time, with sales coming under pressure from weak demand and rising competition. Post-pandemic, the company

Add Comment
Loading...
Cancel
Viewing Highlight
Loading...
Highlight
Close
Top