A big player in the post-acute market is about to get even bigger.
The big keep getting bigger
IPO viewed as positive in long-term-care arena
Although not a surprise, the news of long-term-care provider Select Medical Holdings Corp.’s planned initial public offering is being viewed as a positive move for post-acute providers. Some details were outlined in a public filing earlier this month.
“I think this just represents an example of the investment community seeing this as a viable and needed service,” said Alan Sauber, senior vice president of government affairs for St. Louis-based RehabCare, about the long-term-care market. Sauber is a member of the Acute Long Term Hospital Association, which represents long-term-care providers, including Select. Because of the pending IPO, representatives for Mechanicsburg, Pa.-based Select could not comment on the transaction.
An IPO also would be positive for the company’s executive officers, who stand to gain about $18 million from proceeds of the offering through the company’s long-term cash incentive plan, and who own a sizable portion of the company. Pricing of the offering could come as early as this week, according to financial firm Renaissance Capital.
According to a Securities and Exchange Commission filing, Select will offer 33.3 million shares of its common stock with an estimated offer price between $11 and $13 per share. After the offering, there should be about 150 million to 154 million shares outstanding, depending on demand.
The company said it plans to use proceeds from the IPO to repay at least $186.4 million of terms loans outstanding and any prepayment costs, as well as $18 million to its executive officers under its incentive plan. Remaining proceeds, according to the filing, will be used for repayment or repurchase of debt or for general corporate purposes.
After the offering, the company expects to pay—through the long-term incentive plan—about $4.5 million to Rocco Ortenzio, founder, director and executive chairman; about $6.3 million to Rocco’s son, Robert Ortenzio, founder, director and CEO; about $2.7 million to Patricia Rice, the company’s president and chief operating officer; about $1.3 million to Martin Jackson, executive vice president and chief financial officer; about $900,000 to S. Frank Fritsch, executive vice president and chief human resources officer; about $500,000 to David Cross, executive vice president and chief development officer; $900,000 to James Talalai, executive vice president and chief information officer; and about $900,000 to Michael Tarvin, Select’s executive vice president, general counsel and secretary.
As of Aug. 31, Select’s 18 officers owned about 40 million shares of the company, a number that includes outside investors in the company, according to the filing. Of the company’s senior management on the board, Rocco Ortenzio owned 9.9 million shares; Robert Ortenzio owned 10.4 million shares; Rice owned 2.3 million shares; Jackson owned 1.2 million shares, and Fritsch owned 600,000 shares. It wasn’t clear in the filing if any of them intended to sell shares as part of the IPO.
As of June 30, the company operated 87 long-term acute-care hospitals and five inpatient rehabilitation facilities.
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