Centric Health Enters into Agreement to Acquire LifeMark Health

TORONTO, May 6 /CNW/ - Centric Health Corporation ("Centric Health" or "Centric") (TSX: CHH), Canada's leading diversified healthcare company, announced today that it has entered into an agreement to acquire, amongst other things, all of the common units of LifeMark Health Limited Partnership ("LifeMark"). The transaction is subject to customary closing conditions as well as regulatory, shareholder, unitholder and court approval, financing and satisfactory due diligence.  If all closing conditions are satisfied, the closing is expected to occur in June 2011.

On completion this transaction will provide Centric Health with significant market expansion and scale in the Canadian healthcare industry accompanied by strong earnings and cash flow which will act as a catalyst for Centric's broader strategy.

Background on LifeMark

LifeMark is one of Canada's largest rehabilitation and physiotherapy services companies with a network of over 120 clinics; contracts with 122 senior homes (13,482 beds) and more than 2,000 dedicated employees and consultants operating in seven Provinces. LifeMark also specializes in rehabilitation, eldercare, assessment services, occupational health, disability management and home medical equipment through its interests in Medichair.

Rationale

This strategic acquisition would mark a significant milestone for Centric Health. By combining with LifeMark, Centric Health will have a platform for delivering care in more than 670 locations across Canada and will become one of the largest integrated healthcare providers, offering innovative solutions with improved efficiencies in partnership with healthcare professionals.

With combined pro forma annual revenues in excess of $260 million in 2010 (excluding revenue from LifeMark acquisitions in progress of approximately $30 million), the synergies and rationalization of the two organizations would be significant, offering highly efficient programs and services with a key focus being the provision of unwavering quality care in meeting the needs of patients and healthcare professionals.

The Transaction

The transaction will include, among other things, the purchase of all of the common units of LifeMark, the intellectual property used by LifeMark in connection with its business, the intellectual property related to Medichair and replacement of existing Lifemark debt for an aggregate consideration of up to approximately $215 million. The consideration will be settled by cash of approximately $135 million, the assumption of existing earnout obligations and future debt for acquisitions of up to $20 million and $60 million by the issuance of Centric Health common shares at an issue price of $1.28 per share (the "Performance Shares"), subject to a valuation formula which includes the LifeMark business and certain acquisitions in progress achieving EBITDA1 of approximately $33 million (before Alaris distributions) for the 12 month period ending June 30, 2012 (the "Warranty Period").

Alaris Royalty Corp ("Alaris") (TSX:AD), an integral partner to Lifemark's success in developing into a national physiotherapy and rehabilitation leader, will be paid $65 million cash for a portion of its financial interest in LifeMark and all of its financial interest in MEDIchair. In addition, Alaris will continue to retain an interest in LifeMark which has redemption value of $65.5 million ("the Alaris interest"). Alaris will receive an annual preferred distribution of $6.75 million ("Alaris distributions") subject to a guaranteed annual increase of 4% at the end of each year thereafter. Centric, Alaris and the general partner of LifeMark will enter into an amended and restated partnership agreement which will, among other things, provide that there may be no redemption of the Alaris interest in LifeMark in the first two years following closing of the transaction. The redemption price of the Alaris interest escalates at 4% per annum commencing on the third anniversary following closing.

As part of the transaction, Centric Health will implement an outperformance bonus plan for a maximum of up to $10 million in value for selected employees, subject to an outperformance formula which includes the LifeMark business and certain acquisitions in progress exceeding EBITDA1 of approximately $33 million during the Warranty Period.

A syndicate comprised of major Canadian banks have committed, subject to all closing conditions being satisfied, to provide Senior Secured Credit Facilities of $195 million in connection with the transaction. The Senior Secured Credit Facilities would replace existing Centric Health and LifeMark debt and includes capacity for future acquisitions and general corporate purposes. In addition, the Senior Credit Facilities contemplate a $40 million Accordion feature for future expansion purposes.

The maximum number of securities that will be issued in connection with the acquisition is 46,875,000 Centric Health common shares (or approximately 50.2% of Centric Health's current issued and outstanding common shares, on a non-diluted basis and approximately 27% of Centric Health's current issued and outstanding common shares, on a fully diluted basis).

As a result of the acquisition, each of Craig Gattinger and Ron Lowe will on closing, directly or indirectly, hold 14,058,249 common shares of Centric Health and 14,693,354 common shares of Centric Health, respectively which represents approximately 10.02% and 10.48%, respectively, of the current issued and outstanding shares of Centric Health, on a non-diluted basis.

The TSX requires that security holder approval be obtained in those instances where the number of securities issuable in payment of the purchase price for an acquisition exceeds 25% of the number of securities of the listed issuer which are outstanding, on a non-diluted basis.  Centric Health intends to rely on an exemption granted by the TSX from the requirement to hold a formal shareholder meeting on the basis that holders of more than 50% of Centric Health's common shares have consented in writing to the issuance of the securities. The transaction will not materially affect control of Centric Health given current shareholdings.

ADDITIONAL REMARKS

"This will be a landmark transaction for Centric Health - one that will make us the largest provider of integrated rehabilitation, physiotherapy and elderly care services across Canada," said Dr. Jack Shevel, Chairman of Centric Health.  "The merged entity will offer exciting prospects for continued growth and success in the interests of all stakeholders."

"Becoming a part of the Centric organization is a natural fit for LifeMark", said Craig Gattinger, CEO of LifeMark.  "We share the same core values and philosophies as it relates to quality care and outcomes."

"The combination of businesses, core competencies and intellectual capital represents a formidable group with scope to grow meaningfully in terms of its stated strategic objectives," said Dan Carriere, Chief Executive Officer of Centric Health. "Together, we will strive to be the healthcare group of choice for healthcare professionals and patients, delivering a comprehensive range of products and services, coast to coast. It is our goal to offer a unique Centric Brand of Care characterized by quality, efficiency, effectiveness and delivered through its facilities across the country."

On closing of the transaction Craig Gattinger and Ron Lowe, CEO and President of LifeMark, respectively, will lead and develop the Rehabilitation, Elder Care, Medical Assessment and Disability Management component of Centric Health along with their experienced leadership team and staff.

THE COMBINED GROUP

    Centric Health

  LifeMark Health

  COMBINED GROUP

ELDERCARE
DIVISION

Total: # Beds
LTC2 and RHs3

Total Contracts
 
 
   


31,109


293
 
 
   


13,482


122
 
 
   


44,591


415
 
REHABILITATION
DIVISION
 
Network of Clinics
 
 
   
 

51
(5 owned)
 
   
 

120
(100% owned)
 
   
 

171
 
 
ASSESSMENT
DIVISION
 
Assessor Roster
Size
   
 
750
   
 
3,000
   
 
3,750
4 x SURGICAL
CENTRES
(Ors4:Beds)
  9 : 54   4 : 32   13 ORs4:86 Beds
MEDICHAIR
STORES &
FRANCHISES
      71   71
STAFF &
CONSULTANTS
  ~1,800   ~2,000   ~3,800

About Centric Health

Centric Health's vision is to be Canada's premier healthcare company, providing innovative solutions centered on patients and healthcare professionals. As a diversified healthcare company with investments in several niche service areas, Centric Health currently has operations in medical assessments, disability and rehabilitation management, physiotherapy and surgical centres, homecare, specialty pharmacy and wellness and prevention. With knowledge and experience of healthcare delivery in international markets and extensive and trusted relationships with payers, physicians, and government agencies, Centric Health is pursuing expansion opportunities into other healthcare sectors to create value for all stakeholders with an unwavering commitment to the highest quality of care. Centric Health is listed on the TSX under the symbol CHH. For further information, please visit www.centrichealth.ca. Centric Health's strategic advisor is Global Healthcare Investments & Solutions, Inc. ("GHIS") (www.ghis.us). GHIS and entities controlled by shareholders of GHIS are currently the largest shareholders of Centric Health.

About LifeMark Health

LifeMark Health is a Canadian company with 120 facilities providing integrated health, medical and rehabilitation services to people across the country. Since its inception in November of 1998, the company has focused on bringing together the top medical and rehabilitation practitioners to deliver the highest quality health care to our patients.  Through its eight service divisions, LifeMark represents a consolidation of 1800 clinical practitioners and patient service support staff. LifeMark's national service divisions include: Physiotherapy and Rehabilitation, Independent Medical Assessment, Aging Services, Occupational Therapy, Disability Management, Occupational Health, Home Medical Equipment and Surgical Services.  LifeMark's mission to "Help You Reach Your Potential" reflects an unwavering commitment to ensure that patients benefit from the best treatment available and that clinical staff are provided with exceptional opportunities to learn and grow.  Learn more about LifeMark Health at www.lifemark.ca and Medichair at www.medichair.com

This press release contains statements that may constitute "forward-looking statements" within the meaning of applicable Canadian securities legislation.  These forward-looking statements include, among others, statements regarding completion of the transaction referred to herein, business strategy, plans and other expectations, beliefs, goals, objectives, information and statements about possible future events. Readers are cautioned not to place undue reliance on such forward-looking statements. Forward-looking statements are based on current expectations, estimates and assumptions that involve a number of risks, which could cause actual results to vary and in some instances to differ materially from those anticipated by Centric Health and described in the forward-looking statements contained in this press release. No assurance can be given that any of the events anticipated by the forward-looking statements will transpire or occur or, if any of them do so, what benefits Centric Health will derive there-from.

1 "EBITDA" shall mean the sustainable earnings before interest, taxation, depreciation and amortization of the Business of the Partnership and its Affiliates on a consolidated basis consistently applied (excluding any abnormal or extraordinary items or one-time events or items inconsistent with past practice) and calculated after the Closing Date in exactly the same manner as before the Closing Date or otherwise as the parties may agree from time to time. EBITDA is not a recognized measure under GAAP. Management believes that EBITDA is a useful financial metric as it assists in determining the ability to generate cash from operations. Investors should be cautioned that EBITDA should not be construed as an alternative to net income as determined in accordance with GAAP.

2 "LTC" means Long Term Care.

3 "RHs" means Retirement Homes.

4 "ORs" means Operating Rooms.

 

SOURCE Centric Health Corporation

For further information:

Peter Walkey
Chief Financial Officer
Centric Health
416-496-6166 ext. 329
peter.walkey@centrichealth.ca
Catherine Love
Investor Relations
TMX Equicom
416-815-0700 ext. 266
clove@equicomgroup.com


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