Clarivate (NYSE:CLVT) said it has reached an agreement to sell substantially all of its Life Sciences & Healthcare segment to Altaris, an investment firm focused on the healthcare industry, in a transaction valued at $600 million.
Chief Executive Officer Matti Shem Tov said on a conference call that the deal is expected to close by year-end, subject to customary regulatory approvals and closing conditions. He described the divestiture as a “major strategic step forward” for Clarivate, saying it would sharpen the company’s focus on its remaining Academia & Government and Intellectual Property segments.
Deal Terms and Use of Proceeds
Chief Financial Officer Jonathan Collins said the total consideration includes $525 million in cash and a $75 million seller note. He said the valuation represents just over 10 times the segment’s adjusted EBITDA less capital spending, which he described as an approximate three-turn, or more than 40%, premium to the same metric for Clarivate as a whole.
Clarivate plans to use the net cash proceeds to retire a combination of its 2028 and 2029 notes. Collins said the company intends to use both the transaction proceeds and future free cash flow to repurchase or retire those notes in full by their maturities.
Collins said that approach should lower Clarivate’s net leverage by about 1.5 times over the next few years. He also reiterated that Clarivate expects to generate at least $400 million of free cash flow per year on average over the next few years, consistent with its recent performance.
Strategic Focus Shifts to Two Core Segments
Shem Tov said the sale is part of Clarivate’s broader value creation plan, which he said has focused on improving revenue mix, enhancing sales execution, accelerating innovation and rationalizing the company’s portfolio.
He said Clarivate has improved its organic recurring revenue mix by 900 basis points to 89% and improved organic annual contract value growth by 160 basis points. He also said the company has released 16 major products and AI-powered capabilities, with thousands of customers using those AI capabilities daily.
Following the sale, Shem Tov said Clarivate will be able to concentrate on Academia & Government and Intellectual Property, which he said generate the “vast majority” of the company’s profit and free cash flow.
“I believe we will reach our organic growth potential in both businesses more quickly when all our attention and resources are directed towards them,” Shem Tov said.
Financial Profile Expected to Improve
Collins said Clarivate is affirming the midpoints of its 2026 full-year guidance ranges, except for free cash flow, which now reflects additional transaction costs expected between signing and closing.
On a pro forma basis excluding the Life Sciences & Healthcare segment for the full year, Collins said Clarivate’s revenue and adjusted EBITDA would be lower by approximately $370 million and $120 million, respectively. However, he said the company expects free cash flow to be maintained because the adjusted EBITDA decline would be offset by lower capital spending, one-time costs, interest and taxes.
Collins said the Life Sciences & Healthcare segment has the highest transactional revenue, lowest profit margin and highest capital spending intensity in Clarivate’s portfolio. As a result of the divestiture, the company expects:
- Recurring organic revenue mix to improve by 300 basis points;
- Profit margin to improve by 200 basis points;
- Capital spending to decrease by $60 million;
- Free cash flow margin to expand by more than 300 basis points;
- Interest savings of about $25 million from debt repayment.
Collins also said Clarivate now estimates total transaction-related costs of $35 million tied to the Life Sciences & Healthcare business, including $15 million contemplated in prior free cash flow guidance and an additional $20 million expected through closing. Those costs are not expected to recur.
Analyst Questions Address Reporting, Cross-Selling and AI
In response to a question from Barclays analyst Manav Patnaik, Collins said Clarivate ran a “very robust” and competitive sale process, with interest from both strategic buyers and financial sponsors. He said the company believes it delivered the best deal for shareholders.
Collins also said the Life Sciences segment will be reported as discontinued operations beginning in the second half of the year, starting in the third quarter and continuing until the transaction closes. He said Clarivate will also exclude the segment from organic measures during that period.
Asked by Wolfe Research analyst Scott Wurtzel about the company’s future revenue mix, Collins said the remaining Academia & Government and Intellectual Property businesses would have about 92% recurring organic revenue. He said that puts Clarivate in the range of its stated goal to be an over-90% recurring organic revenue mix business.
RBC Capital Markets analyst Ashish Sabadra asked about cross-selling opportunities and AI investment. Collins said Clarivate has shared customers across its segments and is committed to separating the businesses in a way that prioritizes customer service. He said future emphasis on shared customers will be between Academia & Government and Intellectual Property.
Shem Tov said Clarivate is increasing its use of AI both externally in products and internally across the company. He cited opportunities to make go-to-market activities more efficient, accelerate technology development and further automate corporate functions.
Asked by Stifel analyst Shlomo Rosenbaum how the divestiture could accelerate organic growth, Shem Tov said the key benefit is focus. He said the remaining segments are market leaders with scale, deep customer relationships, strong content and technology platforms.
“We believe that our targets to improve and to grow the business will be better served once we have two leading segments rather than three segments,” Shem Tov said.
About Clarivate (NYSE:CLVT)
Clarivate plc is a global information and analytics company that provides insights and workflow solutions to accelerate the pace of innovation. The company delivers proprietary data, analytics, and expertise to support research and development in the life sciences, intellectual property management, academic institutions, government agencies, and corporations. Its core offerings include citation and patent databases, drug pipeline analytics, trademark research tools, regulatory compliance solutions, and market intelligence platforms.
Originally part of Thomson Reuters’ Intellectual Property & Science division, Clarivate was established as an independent entity in 2016 following a spin-off transaction.
