Tivity Health to Buy Nutrisystem for $1.4 Billion

Nutrisystem has just agreed to accept Franklin-based Tivity Health’s offer to buy the weight loss company for more than $1.3 billion in a cash and stock combo.  In this deal, shareholders of Nutrisystem will each receive $38.75 in cash, as well as 21 cents per share of Tivity per Nutrisystem, share they already own.  At the end of the day, Tivity shareholders will own roughly 87 percent of the newly combined company.

Combined, the revenue of the two companies will equal about $1.3 billion.

This seems like a pretty smart pairing as both companies focus on helping people to better manage their diets and overall health.  Pennsylvania-based Nutrisystem, of course, develops and sells calorie/fat-controlled meal-kit plans (including the high-protein, low-fat eating plan known as South Beach Diet) while Tivity Health owns a diabetes treatment center.  Furthermore, Tivity is the parent company of SilverSneakers, which focuses on customers over the age of 50.

Tivity Health’s Chief Executive Donato Tramuto commented, in a conference call, that he feels the two companies are a great compliment; and on paper, it does seem this way.  Investors, however, appear to be less certain. For one, they are not sure how Tivity plans to sell the Nutrisystem product line to their existing client base.  In addition, investors are worried about the move complicating Tivity’s business model which will actually slow down Nutrisystem’s revenue growth.

That is important, actually, because news of the merger helped to bump shares of Nutrisystem up nearly 30 percent, to hit $43.94 per share in late trading. On the other hand, Tivity shares fell nearly 30 percent at the same time, to reach $28.36.

In a news release, Tramuto said, “The acquisition of Nutrisystem is an exciting and transformational event for Tivity Health as we expand our portfolio of healthy lifestyle brands.  Tivity Health and Nutrisystem share the same mission-driven culture and have highly talented, motivated colleagues. Tivity Health has the opportunity to accelerate its already impressive growth with the addition of Nutrisystem.”

Tramuto goes on to discuss how the combination of Nutrisystem and Tivity Health could help those suffering from the most common chronic conditions that afflict Americans today.  These chronic conditions are actually related to weight management, nutrition, and physical fitness.

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