New Mountain Scraps $32 Billion Deal With Ex-Executive Holt
(Bloomberg) — New Mountain Capital has canceled a deal with one of its former top executives, ending the veteran dealmaker’s dramatic and ambitious bid to buy five portfolio companies that were about to leave the company.
The private equity firm said in a letter to clients late Thursday that it had ended discussions on the deal proposed by Matt Holt and other investors, according to a copy of the letter seen by Bloomberg. This came after numerous proposals and objections to a $32 billion transaction, according to people with knowledge of the discussions.
In December, New Mountain sent a jolt on Wall Street by announcing that Holt, who joined the firm in 2001, was leaving his role as head of private equity to launch a new venture called Thoreau, in what would be one of the industry’s biggest exits in years.
New Mountain said in Thursday’s letter that Holt missed an earlier deadline to complete the offer and that New Mountain viewed the offer submitted last week as worse than the original offer.
“For example, the purchase price of several billion dollars paid to the New Mountain funds would now be deferred and compromised post-closing; debt structure and governance concerns were still unaddressed,” the firm wrote to limited partners of the private equity funds. “Furthermore, the process itself (and the extended timeframe) was becoming an increasing burden and distraction for management and pending management decisions within companies.”
“After additional serious internal review and discussion, we declined to proceed with his transaction on March 3 and asked him to cease his efforts,” the firm said.
New Mountain would generate more than $14 billion in revenue from the deal proposed last week, said the people, who asked not to be named during confidential talks. Sources said the bid was made by JPMorgan Chase & Co. and Goldman Sachs Group Inc., and has equity commitments from JPMorgan and several other investors, he said.
A group including Holt has put forward a revised proposal that would give New Mountain a larger stake in the new venture after March 3 and try to address concerns about delayed payments, some said. This offer, led by ICG Strategic Equity, was also rejected, they said.
Representatives for New Mountain and ICG declined to comment. Holt did not respond to a request for comment.
Sources said Holt spent months developing plans to merge five companies — Datavant, Swoop, Machinify, Smarter Technologies and Office Ally — into Thoreau, a technology platform that would use artificial intelligence to help lower health care costs. The Harvard graduate came up with the company’s name as a reference to American naturalist Henry David Thoreau and his seminal book Walden; Or Life in the Woods.
The deal arranger has tapped healthcare companies, pension funds and Wall Street firms to provide financing for the transaction, which will also include equity commitments from other investors.
New Mountain may pursue the idea of merging some of the companies without Holt himself getting involved.
“Looking ahead, we believe there is significant upside in these five healthcare technology companies, some of which we acquired (as Matt did) in the past year alone,” the firm said in its letter. “We continue to work on various structures for these companies, both individually and in various combinations, and continue to evaluate various timelines and exit paths.”
–With help from Hannah Levitt and Michelle F. Davis.
(Updated with ICG in the eighth paragraph.)
More stories like this available Bloomberg.com
