Acadia To Divest Its UK Unit For $1.47B; Jefferies Lifts PT

Acadia Healthcare announced that it has agreed to sell its UK business operations, which it operates under the name of The Priory Group, to Waterland Private Equity for $1.47 billion. Shares of Acadia Healthcare closed 3.6% on Wednesday.

Acadia (ACHC) expects the deal to fetch approximately $1.35 billion, “net of transaction costs and the settlement of existing foreign currency hedging liabilities and based on the current GBP/USD exchange rate.” The company intends to use the proceeds to pay down debt and for other general corporate purposes. The transaction is likely to close next month.

Acadia CEO Debbie Osteen said, “Since announcing our decision to explore strategic alternatives with respect to the Priory Business, our primary objective has always been to complete a transaction that would maximize value for our stockholders.” (See ACHC stock analysis on TipRanks)

Following the announcement, Jefferies analyst Brian Tanquilut raised the stock’s price target to $60 (23.6% upside potential) from $44 and reiterated a Buy rating.

Tanquilut said that the deal values the Priory business above investors’ expectations. As the company intends to use the proceeds of the sale to lower debt, the analyst expects Acadia’s valuation multiples to expand, reflecting a strong balance sheet and increased focus on US operations.

Overall, consensus among analysts is a Moderate Buy based on 4 Buys and 3 Holds. The average price target stands at $48.57 and implies downside potential of about 3.4% to current levels. So far this year, shares of ACHC have appreciated 51.4%.