Behavioral healthcare provider Psychiatric Solutions must wait a bit longer in its effort to close a deal to acquire Horizon Health Corp. while both companies respond to the Federal Trade Commissions request for additional information last week.
On Feb. 14, Psychiatric Solutions and Lewisville, Texas-based Horizon Health Corp. said they would respond expeditiously to a second request from the FTC regarding the merger, which was announced in late December. They also said the request relates to two markets, although they did not specify which ones. The second request signals the FTC has antitrust concerns about the deal.
In the agreement, Psychiatric Solutions agreed to acquire Horizon in a deal valued at $426 million, consisting of $321 million in cashor $20 per shareand the assumption of Horizons debt.
A second request from the FTC is not typical, according an FTC official. That being said, two attorneys not involved in the deal said its not necessarily a red flag. Its indicative of an issue, but not necessarily indicative of a problem, said David Marx Jr., a partner with McDermott Will & Emery in Chicago.
And Leland Chait, a partner with McGuireWoods, said there has been tougher scrutiny of the healthcare industry from government players such as the Justice Department and the FTC, so it isnt unusual for healthcare companies to receive more attention.
Mitch Katz, a public affairs specialist with the FTC, said the commission does not comment on nonpublic investigations, but said the FTC issued 28 second requests in 2006. That is about 1.5% of all the 1,860 Hart-Scott-Rodino pre-merger filings last year. The act requires the FTC and Justice Department to grant antitrust clearance before certain mergers, tender offers or other acquisition transactions can close.
Its not a positive or negative thing, Katz said. It simply means that the FTC needs more information about where there may be competitive problems. Its another step in the process. Having said that, approximately 3% or less (of) pre-merger filings that come through the commission get a second request each year.
Representatives for Franklin, Tenn.-based Psychiatric Solutions and Horizon were unavailable for comment, but news releases from both companies said they expect the deal to close in the second quarter. The deal cannot close until 30 days after both companies have provided additional information for this second request.