More details were revealed last week about Prime Healthcare Services' proposed acquisition of Daughters of Charity Health System as the parties submitted their takeover application to the California attorney general.
The deal, which is being structured as a member substitution and will convert Daughters to a for-profit organization, is worth $843 million, consisting of a $394 million cash consideration and $449 million for the assumption of the system's debt.
Prime will pay off Daughters' 2005 and 2014 series of bonds and has pledged to fund the system's pension plan, including $280 million in underfunded liabilities. It also pledged to maintain all collective bargaining agreements.
The underfunded pension liabilities are the subject of a lawsuit brought by nurses and other healthcare workers and backed by the Service Employees International Union-United Health Care Workers West, which opposes Prime's takeover.
California's attorney general has 105 days to issue a ruling on the application, and the process is expected to be the longest of the three approvals that the deal requires, Andrew Turnbull, an investment banker with Houlihan Lokey, Daughters' transaction adviser, said on a call with bondholders. The deal also needs approval from the Vatican, as well as federal antitrust approval.
But the approval process could extend beyond the expected timeframe and is likely to encounter significant scrutiny, including pressure from the state's elected officials.
Rep. Mike Honda, whose district includes the South San Francisco Bay Area, said in a written statement last month that he wrote to Attorney General Kamala Harris, “urging her thoughtful consideration of the impact on the quality and access to healthcare when she reviews the sale of the Daughters of Charity hospitals.”