Skip to main content

Here's Why Nutrisystem Is a Healthy Investment for Tivity Health

Publish date:
Video Duration:

Tivity Health (TVTY)  , a leading provider of fitness and health improvement programs, recently announced that it has completed its acquisition of Nutrisystem, a leading provider of weight management products and services, for approximately $1.3 billion in cash and stock.

After the deal's closing on March 8, CEO Donato Tramuto believes the company is in a much healthier position to address consumer health needs across demographics.

"Tivity health legacy business of SilverSneakers was addressing inactivity and addressing loneliness, and one of the other social determinants of health is food insecurity," he explained. "[We're] not just so much looking at Nutrisystem as a weight management, we'll continue down that vein for those consumers that want to manage their weight, but we also have a quintessential opportunity to tailgate off of two very significant legislative changes."

He cited changes in legislation regarding the Centers for Medicare and Medicaid Services and the Chronic Care Act as two key tailwinds for the newly combined business.

Related.Union Pacific CEO: Tariffs and Trade Biggest Threat to Economic Expansion

"CMS is now going to reimburse up to four weeks of food delivery to a senior who has been categorized as having challenges after they leave the hospital in terms of cooking their own meals," he explained. "The chronic care act of 2018 allows medicare advantage to individualize programs like transportation and nutrition for those seniors that are living with multiple chronic conditions. Those are the complex chronic, so we have a quintessential opportunity to do what we did in 2003 with the Medicare modernization act and that law was passed that gave enormous credibility to SilverSneakers and I believe now with these two legislative changes, we have another great opportunity ahead of us."

Tramuto noted that the majority of the company's current customers are medicare participants, which should add to the company's bottom line in a seamless fashion.

To be sure, the market reaction to the synergistic acquisition that Tramuto outlined has been less than enthusiastic. Shares have lost more than half of their value since the deal's announcement in December as concerns about integration risk and the sizable debt taken on overtook market sentiment.

Tramuto stated firmly that he is prepared to deal with the challenges ahead and continue to operate the company in a healthy manner.

"We believe that we have an opportunity with Nutrisystem that spends a lot of money on TV media ads to bring them in as our champion and beacon to scale our SilverSneakers media as we go into 2020 so executing on that will be important and quite frankly, executing on the cost synergies, which we are on track," he explained, highlighting the ability to draw debt down and continue ad spend. "I think the way you get the market back in terms of changing their sentiment is continuing to execute the way we did the first quarter and I'm confident that we have the team to do that."

To hear more about the company's top priorities moving forward this year, check out the interview available above.

Employees of TheStreet are restricted from trading individual securities.

Related Videos