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INDUSTRY NEWS HEALTH CARE
Metropolitan Health to buy Continucare for $416M
Jun 27, 2011, 10:12am EDT Updated Jun 27, 2011, 5:02pm EDT
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Metropolitan Health Networks signed a $416 million deal to buy Continucare Corp., which will receive a premium price above its recent stock value.
The combination would create a company with an 18-county network of 31 primary care practices with 250 primary care doctors serving 68,000 Medicare Advantage and Medicaid patients in Florida. The companies projected that this year they would have a combined $660 million in revenue and more than $90 million in earnings before interest, taxes, depreciation and amortization.
The two lines of business are expected to grow in Florida. The aging population of baby boomers will make Medicare enrollment swell. Florida’s plan to put most Medicaid enrollees into managed care, plus the federal health insurance reform law that expands Medicaid eligibility, could mean more Medicaid patients.
"For many years, Continucare and Metropolitan have each worked diligently in their respective regions throughout Florida to establish high-quality and profitable primary care networks and operations that serve Medicare Advantage customers and, in the case of Continucare, Medicaid customers, as well,” Metropolitan Health Chairman and CEO Michael Earley said in a news release. “Each of our organizations has independently cultivated businesses that have little overlap and provide exemplary primary care to seniors and others in one of Florida's fastest-growing industries.”
He added that Miami-based Continucare’s operational staff and employees would remain virtually intact. Dr. Gemma Rosello, Continucare’s executive VP of operations, would join West Palm Beach-based Metropolitan Health as president of the Continucare subsidiary.
The proposal calls for each shareholder of Continucare (AMEX: CNU) common stock to receive $6.25 in cash, plus 0.0414 of a share of Metropolitan Health (AMEX: MDF) stock, which equates to 20 cents at its current value. Metropolitan Health would need to issue 2.7 million new shares for the deal.
Miami billionaire entrepreneur Dr. Phillip Frost and his affiliates own about 43 percent of Continucare, of which Frost is a board member. He pledged to vote in favor of the deal, which requires shareholder approval.
The deal should close in the third quarter. Metropolitan Health plans to use a new $355 million credit facility from GE Capital Healthcare Financial Services to consummate the transaction.
Continucare shares closed $1.48, or 31 percent, to $6.25. The 52-week high was $5.80 on March 1. The 52-week low was $3.25 on Aug. 31.
Continucare stock has not traded above $6.50 since 1997.
Metropolitan Health shares closed down 13 cents, or 3 percent, to $4.75. The 52-week high was $5.31 on Feb. 18. The 52-week low was $3.21 on Aug. 16.