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Section 1: 8-K (8-K)

Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_________________________
FORM 8-K
_________________________

CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934

March 22, 2019
Date of Report (Date of earliest event reported)   

Evolent Health, Inc.
(Exact name of registrant as specified in its charter)
_________________________


Delaware 
001-37415
32-0454912
(State or other jurisdiction of
incorporation or organization)
(Commission File Number)
(IRS Employer
Identification No.)
 
800 N. Glebe Road, Suite 500, Arlington, Virginia 22203
 
 
(Address of principal executive offices)(zip code)
 
  
(571) 389-6000
(Registrant’s telephone number, including area code)
 
Not Applicable
(Former name, former address and former fiscal year, if changed since last report.)
_________________________

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13 (a) of the Exchange Act. ☐





Item 3.02. Unregistered Sales of Equity Securities.
On March 22, Evolent Health, Inc. (the “Company”) entered into a Stock Purchase Agreement (the “Purchase Agreement), by and between the Company, Momentum Health Acquisition, Inc. (“MHA”) and Momentum Health Holdings, LLC, pursuant to which the Company will acquire an approximately 45% ownership interest in MHA (the “Investment”), the sole owner of GlobalHealth Holdings, LLC, which is the sole owner of GlobalHealth, Inc., a health maintenance organization based in the State of Oklahoma that offers, amongst other things, Medicare Advantage products in the State of Oklahoma.

Pursuant to the terms of the Purchase Agreement and as consideration for the Investment, the Company will contribute to MHA approximately $15,000,000 in cash and $22,500,000 of the Company’s Class A common stock (the “Equity Consideration”), together with certain other assets of the Company. The number of shares of the Company’s Class A common stock to be issued upon the closing of the transactions contemplated by the Purchase Agreement (the “Closing”) will be based on the average of the last reported sale price of a share of the Company’s Class A common stock on the New York Stock Exchange for the five consecutive trading days prior to the Closing. At the Company’s option, the Company may substitute cash for all or any portion of the Equity Consideration.

The consummation of the transactions contemplated by the Purchase Agreement, including the Investment, is also subject to customary closing conditions, including, among others, the approval of the Oklahoma Department of Insurance, the absence of any legal impediments that would prevent the consummation of such transactions, the accuracy of the representations and warranties the parties made in the Purchase Agreement, subject to certain exceptions contained therein, and the parties’ material compliance with their respective obligations under the Purchase Agreement. In addition, at Closing, the Company or a subsidiary of the Company will enter into a master services agreement with MHA and a registration rights agreement with MHA.

The issuance and contribution of the Equity Consideration will be exempt from registration under the Securities Act by Section 4(a)(2) thereof as a transaction not involving any public offering. The Class A common stock to be issued as Equity Consideration will be restricted securities for purposes of Rule 144 under the Securities Act. The Company has not engaged in a general solicitation or advertising with regard to the issuance and contribution of the Class A common stock that will be issued in connection with the Investment.

Item 7.01. Regulation FD Disclosure.
On March 28, 2019, the Company issued a press release announcing the execution of the Purchase Agreement. A copy of the press release is furnished as Exhibit 99.1 hereto and is incorporated herein by reference.

The information, including Exhibit 99.1 hereto, furnished under this Item 7.01 shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject the Company or any other person to liability under that Section, and shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act or the Exchange Act, except as otherwise expressly stated in such filing.


Forward-Looking Statements
In addition to the discussion regarding forward-looking statements in the press release attached as Exhibit 99.1 hereto and incorporated herein by reference, this Current Report on Form 8-K contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, as amended (the “PSLRA”), including, but not limited to, statements regarding the consummation of the transactions contemplated by the Purchase Agreement, including the Investment, and the expected closing thereof and consideration to be paid and issued in connection therewith. The Company claims the protection afforded by the safe harbor for forward-looking statements provided by the PSLRA. Actual events or results may differ materially from those contained in these forward-looking statements. The factors that could cause future events or results to vary from the forward-looking statements contained herein include, without limitation, risks and uncertainties related to the possibility that the closing of the transactions contemplated by the Purchase Agreement, including the Investment, may be delayed or may not occur, and the risk that litigation or other matters could affect the closing of such transactions, including the Investment. In addition, please refer to the periodic reports that the Company has filed with the Securities and Exchange Commission, including its Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K and the risk factors noted therein. Such periodic filings by the Company identify and address other important factors that could cause future events or results to vary from the forward-looking statements set forth in this Current Report on Form 8-K. In addition, the Company disclaims any obligation to update any forward-looking statements contained herein to reflect events or circumstances that occur after the date hereof.






Item 9.01. Financial Statements and Exhibits.
(d) Exhibits.

The following documents are filed as exhibits to this report:

Exhibit
 
 
Number
 
Description
 






SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

EVOLENT HEALTH, INC.
 
 
 
By:
/s/ Jonathan D. Weinberg
Name:
Jonathan D. Weinberg
Title:
General Counsel and Secretary
 
(Duly Authorized Officer)

Date: March 28, 2019



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Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit


Evolent Health, GlobalHealth and Kinderhook Industries Launch “True Health”
to Support Provider-Led Medicare Advantage Plans

Newly established joint venture True Health partners with leading providers
to offer Medicare Advantage plans in targeted geographies

WASHINGTON, D.C., March 28, 2019 - Evolent Health, a company providing an integrated value-based care platform to the nation's leading providers and payers, today announced it has entered into a definitive agreement to create a partnership in the Medicare Advantage (MA) marketplace with GlobalHealth, an Oklahoma-based health maintenance organization which is currently majority-owned by an affiliate of Kinderhook Industries, LLC, a private equity firm. The company will partner with leading provider organizations to launch and scale MA health plans under the True Health brand in targeted geographies.

Consistent with Evolent’s focus on provider-driven value-based care, True Health’s MA product will target partnerships with high-performing providers that are prepared to take delegated risk for MA populations. The newly established joint venture will be anchored by GlobalHealth, a health plan founded in 2003 and based in Oklahoma City that provides insurance coverage to approximately 13,000 MA and approximately 18,000 government employees throughout the state of Oklahoma. True Health expansion markets will leverage GlobalHealth’s health plan management expertise and operating platform combined with Evolent’s clinical model, pharmacy expertise and provider network. The combined assets will support continued growth for GlobalHealth in Oklahoma, as well as the scalable launch and operations of several new MA health plans under the True Health brand for 2020, 2021 and beyond. Beyond the value of its equity ownership, Evolent anticipates that True Health will create an opportunity to amortize Evolent’s current value-based care infrastructure investments by providing True Health with services, which may include clinical program support, population health technology, pharmacy and specialty care management capabilities.

Strategic Rationale
For Evolent, True Health represents a strategic opportunity to enable its active participation in the growing MA market, particularly in geographies where providers seek a new payer “value” model that does not exist in their market today. With the scale of GlobalHealth as an anchor health plan, Evolent can now support these providers while limiting its financial exposure and capital requirements going forward.

Transaction Details
Under the terms of the agreement, the existing equity owners of GlobalHealth (which include an affiliate of Kinderhook Industries, LLC) will contribute GlobalHealth and additional cash in exchange for a 55 percent ownership position in True Health. Evolent will own a 45 percent minority stake and is contributing $37.5 million of capital comprised of $15 million in cash and $22.5 million in stock, in addition to new provider agreements pertaining to its True Health MA line of business. These organizations bring a unique provider orientation and expert leadership in managing health plan operations, clinical innovation and consumer engagement.

Furthermore, Evolent will support the growth of True Health with its clinical expertise and services, as well as the identification of provider partners in select markets where ideal conditions do not exist today for payer-delegated risk models. True Health anticipates funding growth and new market expansion over time through outside capital and, as a result, Evolent does not anticipate providing substantial additional capital to the new venture.

“In select markets, we find that leading providers have a desire to enter the MA market but they are unable to access ‘value-based’ payer arrangements, and they don’t have the scale and capital base to launch their own plans,” said Evolent Chief Executive Officer Frank Williams. “The formation of the partnership with GlobalHealth will allow True Health to serve leading providers and power a highly differentiated clinical model for providers as well as MA beneficiaries. With GlobalHealth and Evolent’s infrastructure and expertise, provider organizations can now access a full suite of administrative and clinical capabilities as well as a financial partner in launching and scaling locally-based plans. While Evolent will continue to support traditional payer/provider value arrangements with ACOs and other value contracting models, True Health will serve a segment of providers that are seeking a clinically-driven, aligned model for launching and operating MA plans.”
“GlobalHealth was founded by a group of physicians committed to delivering the best health care coverage in the industry,” said GlobalHealth President and Chief Executive Officer Scott Vaughn. “Today, our passion for working with providers to introduce innovative and affordable solutions to the market is stronger than ever. We are excited to partner with Evolent Health and their expansive network of providers to grow geographically beyond Oklahoma.”





Evolent Health will account for its minority ownership in True Health as an equity investment. Evolent’s commercial health plan in New Mexico, True Health New Mexico, will continue to be wholly-owned and operated by Evolent.
Advisors
Goldman Sachs & Co. LLC is acting as exclusive financial advisor to Evolent and Bass, Berry & Sims PLC is acting as legal counsel. Moelis & Company LLC is acting as exclusive financial advisor to Kinderhook and Kirkland & Ellis LLP is acting as legal counsel.
Conference Call and Webcast Details
Evolent will hold a conference call to discuss details of the transaction today, March 28, 2019, from 8:00-8:30 a.m., Eastern Time. The conference call will be available on the company's Investor Relations website at http://ir.evolenthealth.com. To participate by telephone, dial 1.855.940.9467 and ask to join the Evolent call. Participants are advised to dial in at least 15 minutes prior to the call to register. An audio playback of the conference call will be available on Evolent's investor relations website, ir.evolenthealth.com, for one week after the call. Evolent invites all interested parties to attend the conference call.
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About Evolent Health
Evolent Health partners with leading provider and payer organizations to achieve superior clinical and financial results in value-based care and under full-risk arrangements. With a provider heritage and over 20 years of health plan administration experience, Evolent partners with more than 35 health care organizations to actively manage care across Medicare, Medicaid, commercial and self-funded adult and pediatric populations. With the experience to drive change, Evolent confidently stands by a commitment to achieve results. For more information, visit www.evolenthealth.com.

About GlobalHealth
GlobalHealth is changing health insurance in Oklahoma. As an industry leader, GlobalHealth is an Oklahoma-based health maintenance organization covering individuals in all 77 Oklahoma counties. Working proactively with its members, GlobalHealth engages a personalized management plan to address their specific needs and ensure the best possible health outcomes. GlobalHealth utilizes cutting edge, predictive data technology as a foundation to deliver improved healthcare as part of its commitment to making health insurance more affordable. Its membership includes state, education and municipal employees, federal employees, and individuals who are eligible for Medicare. To learn more, visit www.GlobalHealth.com.

About Kinderhook Industries
Kinderhook Industries, LLC is a private investment firm that manages over $3.0 billion of committed capital. We have made in excess of 200 investments and follow-on acquisitions since inception. Kinderhook’s investment philosophy is predicated on matching unique, growth-oriented investment opportunities with exceptional financial expertise and our proprietary network of operating partners. Our focus is on middle market businesses with defensible niche market positioning in the healthcare services, environmental/business services and automotive/light manufacturing sectors. We have a track record of successfully and consistently building industry leaders. For more information, please visit: www.kinderhook.com.







Source: Evolent Health, Inc.

Contacts:

Bob East
443.213.0502
Investor Relations
Kim Conquest
540.435.2095
Evolent Media Relations
 



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