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 price represents a 38.9% premium over the closing sale price of Prospect shares on August 13, 2010, and a 29.4% premium to the volume weighted-average closing sale price of approximately $6.57 during the 30 trading days prior to that date.
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.
Prospect’s board of directors, acting on the unanimous recommendation of a Special Committee of independent directors, has approved the merger agreement, determined that the merger is fair to and in the best interests of Prospect and its stockholders, and recommended that Prospect stockholders adopt the merger agreement. “On behalf of the Special Committee of the board of directors of Prospect, we are pleased to have reached an agreement that will enable us to deliver significant and certain value to our stockholders,” said Glenn Robson, Chairman of the Special Committee.
Some directors and officers of Prospect that currently own in the aggregate approximately 10.4 million shares of Prospect’s outstanding common stock (representing nearly 50% of Prospect’s outstanding shares) have entered into a voting agreement in which they have agreed to vote all of their Prospect shares in favor of the adoption of the merger agreement. These stockholders also have agreed to exchange approximately 6.2 million of their Prospect shares for equity interests in the sponsored purchasing entity in lieu of their receipt of the cash merger consideration for those shares.
Under the merger agreement, Prospect has the right to solicit competing acquisition proposals from third parties during the 40-day period ending September 25, 2010. UBS Investment Bank will assist Prospect’s Special Committee in connection with the solicitation. Prospect does not intend to disclose developments regarding this process, unless the Special Committee and Prospect’s board of directors reach a decision regarding any superior proposals that may be made. There is no assurance that this process will result in a superior proposal. In addition, Prospect may, at any time, subject to the terms of the merger agreement, respond to unsolicited proposals.
Upon a change of control of the Company, each holder of the Company’s outstanding 123/4% Senior Secured Notes Due 2014 will be entitled to require the Company to repurchase all or a portion of the holder’s notes at a purchase price in cash equal to 101% of the principal amount of the notes plus accrued and unpaid interest, if any. Funds affiliated with Leonard Green & Partners, L.P. have agreed to backstop the Company’s obligation to repurchase any notes that are presented.
If you are a current shareholder and would like to discuss your options of exercising your rights as a shareholder, which include ensuring that the company is getting the highest possible price for the company, and that the board of directors will act in the best interest of the shareholders, please contact us.
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