NutriSystem Inc. (NASDAQ:NTRI) confirmed Monday morning it has agreed to sell itself to Tivity Health Inc (NASDAQ:TVTY), a provider of fitness and health improvement programs, in a cash and stock transaction.

What Happened

Tivity will pay Nutrisystem shareholders $38.75 per share in cash in addition to 0.2141 Tivity Health shares for each share of Nutrisystem common stock. The transaction implies an enterprise value of $1.3 billion and an equity value of $1.4 billion, or around $47 per share. The deal implies a 30 percent premium based on the volume-weighted average price for Nutrisystem's stock over the past five trading sessions.

The rationale behind the transaction is to create a new entity that's "unique in offering, at scale, an integrated portfolio of fitness, nutrition and social engagement solutions to support overall health and wellness," the companies said.

Why It's Important

Tivity Health's CEO Donato Tramuto said the transaction represents a "transformational event" as the companies share a common mission of health and wellness. As a larger company, Tivity Health has a better opportunity to accelerate its "already impressive growth."

Nutrisystem President and CEO Dawn Zier said the transaction will offer its shareholders "significant value and the opportunity to participate in the upside potential of the combined company."

What's Next

Tivity Health said the transaction will lift its pro forma net leverage to around 4.4 times, including the benefit of identified cost synergies. By the end of 2020 the company says it expects to reduce its net leverage to less than 3.5 times and less than 2.5 times by the end of 2021.

The transaction is expected to close in the first quarter of 2019 and remains subject to approval of Nutrisystem shareholders.

Nutrisystem shares treaded up 31 percent to $44.73 in the pre-market session.

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