Agreement also in place to sell interest in underlying real estate
TORONTO, Feb. 26, 2020 /CNW/ - Medical Facilities Corporation ("Medical Facilities," "MFC" or the "Corporation") (TSX: DR) announced today that it has sold the majority of its interest in Unity Medical and Surgical Hospital ("UMASH") to a group of local investors (the "Buyers"), including leading physicians affiliated with South Bend Orthopaedics, The South Bend Clinic, and Allied Physicians of Michiana.
"After actively pursuing various strategic alternatives, our plan to improve UMASH has come together," said Robert Horrar, President and CEO of Medical Facilities. "By partnering with three of the premiere physician groups in the area, we are taking an important step in enhancing the long-term strength of both UMASH and the Corporation, as the transaction should significantly improve facility utilization and financial performance."
Medical Facilities no longer has a controlling interest in UMASH, with the Corporation's ownership interest decreasing to 31.7% from 87.6%. As a result, Medical Facilities will no longer consolidate UMASH's financial and operating results in the Corporation's consolidated financial statements. Going forward, Medical Facilities will account for its interest in UMASH under the equity method of accounting.
Medical Facilities received $1.1 million in cash consideration for its equity interests, subject to customary adjustments, which implies an equity value for UMASH of $2.0 million, and enterprise value $23.1 million. In connection with the transaction, UMASH's debt obligation to MFC was reduced by $3 million, with the remaining $20.0 million being structured on a five-year term secured by, among other things, the Buyers' equity in UMASH. The Buyers have options to acquire more of Medical Facilities' equity interest in UMASH on both the first and second anniversaries of the transaction closing for the greater of the current per share purchase price or the fair market value of the interest at the time the purchase option is exercised. In the event that Medical Facilities' ownership in UMASH falls below 25%, all of the UMASH debt owed to Medical Facilities would be required to be immediately repaid.
The parties anticipate needing to make capital contributions to fund working capital post-closing; Medical Facilities' share is anticipated to be approximately $1.4 million.
MFC also announced an agreement for the sale of the real estate assets underlying UMASH, consisting of land and building, for approximately $25 million, subject to adjustments for confirmatory due diligence and closing costs, to investors affiliated with the Buyers. A deposit of $750,000 was received in connection with the real estate transaction, closing of which is subject to customary closing conditions and is expected to occur in the second quarter of 2020.
"Alongside other recent initiatives, including the sale of our interest in Central Arkansas Surgical Center last month, we remain focused on strengthening our balance sheet, improving operational efficiencies, and increasing our financial flexibility to better pursue long-term value maximizing opportunities," added Mr. Horrar.
About Medical Facilities
Medical Facilities, in partnership with physicians, owns surgical facilities in the United States. Medical Facilities' portfolio includes controlling interest in four specialty surgical hospitals located in Arkansas, Oklahoma, and South Dakota, and an ambulatory surgery center located in California, as well as a non-controlling interest in one specialty surgical hospital in Indiana. In addition, through a partnership with NueHealth LLC, Medical Facilities owns controlling interest in six ambulatory surgery centers located in Michigan, Missouri, Nebraska, Ohio, Oregon, and Pennsylvania. The specialty surgical hospitals perform scheduled surgical, imaging, diagnostic and other procedures, including primary and urgent care, and derive their revenue from the fees charged for the use of their facilities. The ambulatory surgery centers specialize in outpatient surgical procedures, with patient stays of less than 24 hours. For more information, please visit www.medicalfacilitiescorp.ca.
About South Bend Orthopaedics
SBO has provided orthopedic care to the South Bend and surrounding areas since 1947. The group has provided the orthopedic surgeons for the University of Notre Dame athletic department since 1949. They have four locations in Indiana: South Bend, Mishawaka, Plymouth and La Porte. The South Bend location also has an urgent care focused on orthopedics—SBOrthoNow. In addition to their 18 orthopedic surgeons, they also have physical therapists, occupational therapists and athletic trainers. For more information on South Bend Orthopaedics, please visit their website at https://www.sbortho.com.
About The South Bend Clinic
The South Bend Clinic has been providing healthcare to the Indiana community since 1916. Today, its 150 physicians span primary care and 28 specialties with more than 350,000 visits annually across ten campuses. The clinic and its physician and providers have consistently been recognized as top performers in delivering quality of care and managing the total cost of care as compared to peer groups in Indiana and the Midwest. For more information on The South Bend Clinic, visit https://www.southbendclinic.com.
About Allied Physicians of Michiana
Allied Physicians of Michiana is an independent, multi-specialty physician group founded on the philosophy of working in partnership, as allies, providing the highest quality care, at reasonable cost. Allied is comprised of 40 providers, with locations in three counties in North Central Indiana. Allied's surgeons are board certified in ENT, facial plastic surgery, general surgery, vascular surgery, colorectal, obstetrics and gynecology, orthopedics, podiatry, urology, as well as board certified pediatricians. Allied providers, whether surgical, primary, physical therapy, audiology or diagnostic imaging are known for their high-quality standards provided through comprehensive care and compassionate service. Utilizing the latest techniques and state-of the-art technology, Allied's 11 practices are dedicated to excellence and convenience for all of its patients. For more information on Allied Physicians of Michiana, please visit their website at YourAlliesForLife.com
Caution concerning forward-looking statements
Statements made in this news release, other than those concerning historical financial information, may be forward-looking and therefore subject to various risks and uncertainties. Some forward-looking statements may be identified by words like "may", "will", "anticipate", "estimate", "expect", "intend", or "continue" or the negative thereof or similar variations. Certain material factors or assumptions are applied in making forward-looking statements and actual results may differ materially from those expressed or implied in such statements. Factors that could cause results to vary include those identified in Medical Facilities' filings with Canadian securities regulatory authorities such as legislative or regulatory developments, intensifying competition, technological change and general economic conditions. All forward-looking statements presented herein should be considered in conjunction with such filings. Medical Facilities does not undertake to update any forward-looking statements; such statements speak only as of the date made.
1 EBITDA is a non-IFRS financial measure. While Medical Facilities believes that this measure is useful for the evaluation and assessment of its performance, it does not have any standard meaning prescribed by IFRS, is unlikely to be comparable to similar measures presented by other issuers, and should not be considered as an alternative to comparable measures determined in accordance with IFRS. For further information on this and other non-IFRS financial measures, please refer to Medical Facilities' most recently filed management's discussion and analysis, available on SEDAR at www.sedar.com.
SOURCE Medical Facilities Corporation
For further information: David Watson, Chief Financial Officer, Medical Facilities Corporation, 416.848.7380 or 1.877.402.7162, [email protected]; Trevor Heisler, Investor Relations, NATIONAL Capital Markets, 416.848.1434, [email protected]