(Bloomberg) — New Mountain Capital has scrapped a deal with one of its former top executives, ending a dramatic and ambitious bid by the veteran dealmaker to acquire five portfolio companies on his way out of the firm.
The private equity firm told clients in a letter late Thursday that it has ended talks over the deal proposed by Matt Holt and other investors, according to a copy of the letter seen by Bloomberg. That followed multiple proposals and counters in what would have been a $32 billion transaction, according to people with knowledge of the discussions.
In December, New Mountain sent a jolt across Wall Street with the announcement that Holt, who joined the firm in 2001, was leaving his role as president of private equity to set up a new venture named Thoreau in what would have been one of the industry’s biggest exits in years.
New Mountain said in Thursday’s letter that Holt missed a previous deadline to complete the offer, and New Mountain viewed a bid made last week as worse than the original proposal.
“For example, several billion dollars of the purchase price to New Mountain funds was now to be deferred and left at risk post-closing; the debt structure and governance concerns were still unaddressed,” the firm wrote to limited partners of its private equity funds. “In addition, the process itself (and elongated time frame) was becoming an increasing burden and distraction to management, and to pending management decisions at the companies.”
“After additional serious internal reviews and discussions, on March 3rd we declined to proceed with his transaction and asked him to end his efforts,” the firm said.
New Mountain was set to receive more than $14 billion of proceeds from the deal proposed last week, said the people, who asked not to be identified discussing confidential talks. The offer was backed by more than $12 billion of debt from JPMorgan Chase & Co. and Goldman Sachs Group Inc. and had equity commitments from JPMorgan and several other investors, the people said.
A group including Holt put forth a revised proposal after March 3 that would have given New Mountain a larger stake in the new venture and sought to address concerns about the deferred payments, some of the people said. That proposal, led by ICG Strategic Equity, also was rejected, they said.
Representatives for New Mountain and ICG declined to comment. Holt didn’t reply to a request for comment.
Holt has spent months developing the plans to combine the 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 people said. The Harvard graduate came up with the name of the company as a nod to American naturalist Henry David Thoreau and his seminal book Walden; Or, Life in the Woods.
The dealmaker canvassed health-care companies, pension funds and Wall Street firms to provide financing for the transaction, which also would have included equity commitments from other investors.
New Mountain may still pursue Holt’s idea of combining some of the companies, just without him involved.
“Looking forward, we believe (as Matt did) that there is significant upside to these five health care tech companies, some of which we have only acquired in the last year,” the firm said in the letter. “We continue to work on a range of structures for these companies — both stand-alone and in various combinations – and continue to consider a range of timetables and paths to exit.”
–With assistance from Hannah Levitt and Michelle F. Davis.
(Updates with ICG in eighth paragraph.)
