Select Medical Corp., Mechanicsburg, Pa., agreed to become a subsidiary of a new company formed by private equity firm Welsh, Carson, Anderson & Stowe in a $2.3 billion deal that would take Select Medical private.
The company, which operates 83 long-term acute-care hospitals, has suffered on the New York Stock Exchange since Medicare announced plans to restrict admissions to such facilities, Jefferies & Co. analyst Frank Morgan said. Following the merger announcement, Select Medical's stock rose about 22% to $17.40 per share, near its 12-month high of $19.75 per share.
Morgan said going private would allow Select Medical to transition to the new admissions standards out of the public spotlight, but the company could seek to go public again after the transition.
The deal must be approved by Select Medical shareholders. It is expected to close in the first quarter of 2005.