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Private Equity Firm Buys Prospect Medical–Southern California HMO/Hospital Management Firm

Posted Aug 16 2010 8:59am

Once more we are seeing more moving in the direction of private equity image investments.  Many of the MDs I interact with have patients enrolled with Prospect, some mentioning the claim process and approvals being tedious and time consuming.  Along with the deal comes 158 million of debt.  I am guessing we may be seeing more of this action in Southern California as physicians' groups, IPAs are looking to either merge or be purchased by other associations. 

You can almost expect the hospital efficiencies to be a priority on the list with bringing new analysis software and procedures into place to maximize profits and hopefully provide better operating facilities. 

In a related press release an accounting firm is investigating the purchase with concerns of breaches of fiduciary duty and other violations of the law.  BD 

Leonard Green & Partners has agreed to acquire Prospect Medical Holdings Inc. (Nasdaq: PZZ), operator of five community-based hospitals in the greater Los Angeles area. The deal is valued at approximately $363 million, including the assumption of approximately $158 million in debt. Prospect stockholders will receive $8.50 per share.

Prospect Medical Holdings, Inc. (Nasdaq: PZZ) (“Prospect” or the “Company”) announced today that it has entered into a definitive merger agreement to be acquired for $8.50 per share in cash by an entity sponsored by Leonard Green & Partners, L.P. in which certain stockholders of Prospect will also participate. The total transaction value is approximately $363 million, including the assumption of approximately $158 million in Prospect’s net debt.

The merger is subject to approval by Prospect stockholders holding a majority of Prospect’s outstanding shares, the expiration or termination of the applicable antitrust waiting period, and other customary closing conditions. The merger is not subject to a financing condition.

About Prospect

Prospect Medical Holdings owns and operates five community-based hospitals in the greater Los Angeles area, and manages the provision of healthcare services of HMO enrollees in southern California, through its network of specialist and primary care physicians. Prospect Medical Holdings’ website can be found at www.prospectmedicalholdings.com.

About Leonard Green & Partners, L.P.

Leonard Green & Partners is one of the nation’s leading private equity firms with over $9 billion in equity commitments under management, was founded in 1989, and has invested in 51 companies with an aggregate value in excess of $42 billion. The firm’s investments are focused primarily on North American companies in a range of industries including retail, consumer products, distribution, media, business services and healthcare. Additional information is available at www.leonardgreen.com

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