Navient to sell Healthcare Services business to CorroHealth as part of ongoing plan to simplify company

Rhea-AI Summary

Navient (Nasdaq: NAVI) has agreed to sell its Healthcare Services business, operating as Xtend Healthcare, to CorroHealth for $365 million in cash. This move aligns with Navient's strategy to simplify operations, reduce expenses, and enhance flexibility. The deal, expected to close by September 2024, will transfer approximately 950 employees to CorroHealth.

As of June 30, 2024, the Healthcare Services business had a book value of about $136 million, including $113 million in goodwill and intangible assets. Navient is also in discussions to potentially sell its Government Services businesses, which had a book value of $192 million as of the same date.

Positive

• Sale of Healthcare Services business for $365 million cash consideration
• Alignment with strategic objectives to simplify company and reduce expense base
• Potential sale of Government Services businesses under discussion

Negative

• Divestiture of revenue-generating Healthcare Services business
• Uncertain financial impact and potential loss from the sale of Government Services businesses

Insights

Financial Analyst

Navient's sale of its Healthcare Services business to CorroHealth for $365 million cash is a significant move in its strategic simplification plan. With a book value of $136 million as of June 30, this transaction likely results in a substantial gain, potentially over $200 million. This influx of cash could strengthen Navient's balance sheet and provide flexibility for debt reduction or shareholder returns.

The divestiture of non-core assets aligns with industry trends of focusing on core competencies. However, investors should note that this sale reduces Navient's revenue diversification. The potential sale of the Government Services business, with a $192 million book value, could further impact the company's financial structure and future earnings potential.

Overall, this move signals a shift towards a leaner, more focused operation, which could lead to improved operational efficiency and potentially higher profit margins in the long term.

Market Research Analyst

This strategic move by Navient reflects a broader trend in the financial services sector towards streamlining operations and focusing on core competencies. The sale of the Healthcare Services business, operating as Xtend Healthcare, to CorroHealth is likely to be viewed positively by the market for several reasons:

• It demonstrates Navient's commitment to its simplification strategy, potentially improving investor confidence.
• The cash infusion of $365 million provides financial flexibility, which could be used for debt reduction or shareholder returns.
• The divestiture may lead to improved operational efficiency and potentially higher profit margins.

However, investors should also consider the potential loss of revenue diversification and the uncertain outcome of the ongoing discussions about the Government Services business sale. These factors could impact Navient's future growth prospects and risk profile.

Legal Expert

The sale of Navient's Healthcare Services business to CorroHealth presents several legal considerations:

• Regulatory Approval: While not explicitly mentioned, such transactions often require regulatory approval, which could affect the closing timeline.
• Employee Transition: The transfer of approximately 950 employees to CorroHealth may involve complex employment law considerations, including potential changes to contracts, benefits and workplace policies.
• Contractual Obligations: The agreement likely includes provisions for the transfer of existing client contracts, which may require careful legal scrutiny to ensure smooth transition and continuity of services.
• Disclosure Obligations: Navient's 8-K filing demonstrates compliance with SEC regulations regarding material corporate events. Ongoing transparency will be crucial, particularly concerning the potential sale of the Government Services businesses.

These legal aspects underscore the complexity of the transaction and the importance of thorough due diligence and careful execution to mitigate risks and ensure a smooth transition.

Company still in discussions about potential sale of Government Services businesses

HERNDON, Va., Aug. 13, 2024 (GLOBE NEWSWIRE) -- Navient (Nasdaq: NAVI) announced today that it had reached an agreement to sell its Healthcare Services business to CorroHealth, a leading health technology company.

“This transaction is an important achievement in our initiative to explore strategic options for our Business Processing Solutions division and our strategic objectives to simplify our company, reduce our expense base, and enhance our flexibility,” said Dave Yowan, president and CEO of Navient. “CorroHealth is a great match for Xtend and its colleagues and clients.”

Doing business as Xtend Healthcare, Navient’s healthcare revenue cycle management organization is headquartered in Hendersonville, Tenn. CorroHealth will continue to operate Xtend from its Hendersonville offices. As part of the agreement, approximately 950 employees will join CorroHealth.

“We are very pleased to bring the Xtend team and technology to CorroHealth,” said CorroHealth CEO Pat Leonard. “This will allow us to offer an even more fully rounded suite of solutions to our customers, further strengthening their financial position, and empowering them to focus on providing high quality health care.”

“The Xtend team is excited to join a world-class health technology leader like CorroHealth,” said Mike Morris, CEO of Xtend Healthcare. “As part of the CorroHealth team, we will have a broader scope of capabilities and automation tools to offer our customers.”

The transaction is expected to close by the end of September, subject to certain conditions. Additional information can be found in the 8-K filed by Navient today. Navient was advised on the transaction by Houlihan Lokey and WilmerHale.

The purchase price for the Healthcare Services business is $365 million cash consideration, subject to customary adjustments. The amount of the net gain from the sale has not yet been determined, and the final financial statement impact of the sale will depend on, among other things, net sale proceeds and the book value at the time of closing. As of June 30, 2024, the book value of the Healthcare Services business was approximately $136 million, including $113 million of goodwill and acquired intangible assets.

Navient remains in active discussions about the potential sale of its Government Services businesses. The financial statement impact of the Government Services business process, and any resulting loss or gain, is uncertain at this time. The book value of the Government Services business as of June 30, 2024, was approximately $192 million, including $138 million of goodwill and acquired intangible assets.

About Navient
Navient (Nasdaq: NAVI) provides technology-enabled education finance and business processing solutions that simplify complex programs and help millions of people achieve success. Our customer-focused, data-driven services deliver exceptional results for clients in education, healthcare, and government. Learn more at navient.com.

Contacts:
Navient Media: Paul Hartwick, 302-283-4026, paul.hartwick@navient.com
Navient Investors: Jen Earyes, 703-984-6801, jen.earyes@navient.com

FAQ

What is the sale price of Navient's Healthcare Services business to CorroHealth?

Navient (NAVI) has agreed to sell its Healthcare Services business to CorroHealth for $365 million in cash, subject to customary adjustments.

How many employees will be transferred from Navient to CorroHealth in the Healthcare Services business sale?

Approximately 950 employees from Navient's Healthcare Services business (Xtend Healthcare) will join CorroHealth as part of the agreement.

When is the Navient Healthcare Services business sale to CorroHealth expected to close?

The transaction between Navient (NAVI) and CorroHealth is expected to close by the end of September 2024, subject to certain conditions.

What was the book value of Navient's Healthcare Services business as of June 30, 2024?

As of June 30, 2024, the book value of Navient's (NAVI) Healthcare Services business was approximately $136 million, including $113 million of goodwill and acquired intangible assets.