Surgery Partners' $5.7bn deal needs $1.9bn in new cash. Apollo's $5bn goes to funds

Surgery Partners' $5.7bn price tag includes about $1.9bn in cash for other holders, $1.2bn rolled over by Bain and $2.6bn in net debt. Apollo's $5bn at Mubadala Capital is a commitment to funds rather than a purchase price.

Surgery Partners holders get $23.50 a share in cash, and the stock closed Monday at $23.25. That leaves a 1.1% spread, so the market already prices an early close.

The cash changing hands is below the $5.7bn headline figure. Bain Capital rolls its 39% into the buyer, so cash is paid for only 61% of the equity. Apollo's $5bn at Mubadala Capital also represents a different kind of commitment.

HealthSpan Partners will buy Surgery Partners for $23.50 a share in cash, according to the Surgery Partners release. HealthSpan is a contractual affiliate and supporting organisation of the nonprofit Bon Secours Mercy Health. The deal carries an enterprise value of about $5.7bn, and closing is expected in the first quarter of 2027.

The shares rose 47.6% on Monday from $15.75 on Friday.

How the $5.7bn breaks down

Enterprise value is equity plus net debt, so it is not what shareholders receive. The 10-Q shows 130.9 million shares, which at $23.50 is equity of $3.08bn. Debt of $3.75bn, less $919m of finance leases and $217m of cash, leaves $2.6bn of net debt. Together they reproduce the $5.7bn.

Bain owns about 39% of the shares and rolls them over, which is roughly $1.2bn of the equity. Everyone else gets about $1.9bn in cash, a little more once equity awards convert. So cash to public holders is about a third of the headline.

Bain remains invested after control changes hands. It will "remain a significant partner" with HealthSpan Partners after closing, holding minority equity in the buyer. The company survives as a wholly owned subsidiary of that buyer.

Name, brand and headquarters are expected to remain. The release says it is expected to stay a secular organisation. The combined platform adds more than 200 locations across 30 states and about 5,000 affiliated physicians.

Valuation, financing and approval risks

The premium looks large but starts from a low point. The $23.50 offer is 49% above Friday's $15.75 close. In the CFO's email to top shareholders and analysts it is 64% above the 30 day average price.

The shares touched $23.44 on 29 October 2025, a year ago. So the offer is only 0.3% above that high, and holders are paid back to where the stock stood then.

The price is full for a business whose profit is slipping. The offer is about 10.9 times last twelve months Adjusted EBITDA (earnings before interest, tax, depreciation and amortisation, adjusted) of $520.8m. That is 2025's $526.2m, minus the first half of 2025 ($232.9m), plus the first half of 2026 ($227.5m).

Adjusted EBITDA fell 2.3% in the first half. Net debt already stands at 5.0 times it before any new borrowing.

The buyer has arranged financing to support completion. The merger agreement, signed on 23 October, has no financing condition. Jefferies has committed the new debt as sole initial underwriter, and Bon Secours Mercy Health guarantees the obligations of the buyer and merger subsidiary.

Surgery Partners owes the buyer a $109m fee, 3.5% of equity value. It is due if the company takes a rival bid, changes its board recommendation or fails at the vote or end date in specified cases. That fee deters rivals. It does nothing for holders if regulators block the deal.

Two votes are needed. One is a majority of all shares, which Bain has pledged to deliver. The other is a majority of the votes cast by disinterested holders, and that is the real test.

The Hart-Scott-Rodino antitrust waiting period must also expire. The outside date is 23 July 2027.

The spread pays too little for the risk of a failed vote or a regulatory block. A $23.25 close against $23.50 is a gross spread of 1.1%. Over about five months to 31 March, that is roughly 2.6% a year, well below the 4.99% ten year Treasury yield on 26 October.

The market is pricing an early close, with little room for delay. The next company event is the third quarter report on 9 November.

What the Mubadala commitments cover

The smaller Mubadala Capital deal also requires separating the headline figure from the purchase price. It was announced at 8:00am EDT on Monday. Apollo's release says Apollo will take a minority equity stake in Mubadala Capital and commit capital across its investment strategies.

Other strategic investors will join as minority shareholders. Together they are expected to commit an aggregate $5bn to Mubadala Capital's investment strategies at initial close.

The $5bn is money that Apollo and other new investors plan to put into Mubadala Capital's funds at the first close, rather than the price of the equity stake.

Mubadala Capital's core alternatives business manages over $60bn, so the commitments equal at most about 8% of it. The $755bn platform figure counts assets managed, advised and administered through partnerships, and is the wrong base.

Mubadala Capital's majority ownership remains unchanged. Apollo joins the founders of Silver Rock Financial as an equity holder, and Mubadala Investment Company remains the majority shareholder. Mubadala Capital keeps its own governance, with its management retaining full authority over investment decisions.

Reuters cites a person familiar with the matter saying Apollo's stake is nearly 10%.

Apollo already works with Mubadala. Co-president John Zito calls it "a trusted partner in seeding and scaling a number of our strategies over the years." The deal puts equity ownership on top of that.

The $5bn represents a fund raise anchored by strategic investors rather than a valuation of the manager. Surgery Partners changes owner and Bain stays on as a minority partner. Mubadala Capital keeps its owner and adds Apollo.

Closing dates and signals to watch

Apollo and Mubadala guide to a fourth quarter 2026 close. The first test is whether the $5bn of strategic commitments is reported at initial close by 31 December.

At Surgery Partners, the spread should shrink toward zero by 31 March 2027 as the proxy, the waiting period and the disinterested vote clear. A spread that widens after the proxy filing would signal a regulatory or vote problem.