This morning, Medical Facilities Corporation (TSX: DR) announced it had sold the majority of its interest in Unity Medical and Surgical Hospital ("UMASH") to a group of local investors, 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.
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.
Source: Medical Facilities Corporation