The $1.8 billion agreement by United Surgical Partners International to sell itself to a private equity firm last week adds to an already active mergers and acquisitions market.
Similar news is expected soon from HealthSouth Corp., which still anticipates announcing the sale of its surgery center and outpatient rehabilitation divisions later this quarter.
But on Jan. 8, Addison, Texas-based United Surgical shifted attention away from that anticipated deal when it said it would merge with UNCN Acquisition Corp., an affiliate of private equity firm Welsh, Carson, Anderson & Stowe, for $1.8 billion, or $31.05 per share to shareholders. The deal, which is subject to approval by United Surgical shareholders and is expected to close in the second quarter, allows United Surgical until Feb. 17 to actively solicit other possible bidders.
If the company accepts another offer before that date, it must pay UNCN a $14.7 million termination fee; after that no shop period start date, the termination fee jumps to $42.5 million.
Scott Macomber, executive vice president and chief financial officer at NovaMed, a publicly owned ambulatory surgery center company based in Chicago, said he thought most were surprised by the announcement, which he thinks has to do with the fact that there is a lot of private equity money available and that Welsh Carson knows the company well.
In fact, the company had not considered changing to private ownership until Welsh Carson approached United Surgical in November, said Mark Kopser, United Surgicals executive vice president and chief financial officer. Established in 1979, New York-based Welsh Carson co-founded United Surgical with Donald Steen, the companys chairman, in 1998. Today United Surgical owns or operates 141 surgical facilities including three facilities in London, and reported revenue of about $423 million for the first nine months of 2006. Roughly 91% of its facilities are ASCs.
This is one of those situations where Welsh Carsons knowledge and understanding of the business allows them to be opportunistic, said Darren Lehrich, a managing director at Deutsche Bank Securities. Sometimes I think the shareholders dont make out as well as they should, and thats why were disappointed, he said.
At National Surgical Hospitals, a private, Chicago-based company that owns ASCs and specialty hospitals, President and Chief Executive Officer John Rex-Waller described United Surgicals practice of partnering hospitals and physicians as a great model and said acting as a private player has its benefits. A recent study showed that hospital ownership of ASCs is on the upswing while physician ownership is down (See story, p. 18).
A HealthSouth spokeswoman said the company would not disclose information about potential bidders for its surgery-center segment.