MedCath Corporation Announces Entering Into Definitive Agreements Relating to the Sale of Arkansas Heart Hospital and Heart Hospital of New Mexico
CHARLOTTE, N.C., May 9, 2011 /PRNewswire/ -- MedCath Corporation (Nasdaq: MDTH), a healthcare provider focused on high acuity healthcare services, today announced that it has entered into definitive agreements relating to the sale of Arkansas Heart Hospital and Heart Hospital of New Mexico.
Arkansas Heart Hospital
MedCath Corporation announced today it has entered into a definitive agreement to sell its 70.3% ownership interest and management rights in Arkansas Heart Hospital to AR-MED, LLC pursuant to the terms of an Equity Purchase Agreement dated May 6, 2011 (the "Equity Purchase Agreement"). AR-MED, LLC is majority owned by Dr. Bruce Murphy, a physician affiliated with Little Rock Cardiology Clinic, P.A. and a current investor in the Arkansas Heart Hospital. The transaction is subject to MedCath stockholder approval and other customary closing conditions listed in the Equity Purchase Agreement.
Purchase terms are based on the hospital's valuation of $73.0 million plus a percentage of the hospital's available cash, which is anticipated to net approximately $60.0 million to MedCath after closing costs and taxes. The net amount anticipated to be received by MedCath includes repayment of inter-company debt owed by Arkansas Heart Hospital to MedCath.
"We are proud of the accomplishments achieved by working closely with Arkansas Heart Hospital's physician leadership over the past 14 years, and are glad to see that legacy continue with the acquisition of MedCath's ownership," said O. Edwin French, MedCath's president and CEO.
Heart Hospital of New Mexico
MedCath also announced today that its Heart Hospital of New Mexico has entered into a definitive agreement to sell substantially all of its assets to Lovelace Health System, Inc. pursuant to the terms of an Asset Purchase Agreement dated May 6, 2011 (the "Asset Purchase Agreement"). The transaction is subject to MedCath stockholder approval, regulatory approval and other customary closing conditions listed in the Asset Purchase Agreement. Lovelace Health System, Inc. is an Albuquerque, New Mexico, health system which is part of Ardent Health Services, based in Nashville, Tennessee.
The transaction values the Heart Hospital of New Mexico's assets at $119.0 million. The limited liability company that currently owns Heart Hospital of New Mexico, of which 74.8% is owned by MedCath, will retain its net working capital. MedCath anticipates receiving approximately $62.0 million in net proceeds from the transaction, after collection of all accounts receivable, payment of all known liabilities, including taxes, and repayment of inter-company debt owed by Heart Hospital of New Mexico to MedCath, pro-rata minority interest payments and an allocation of additional funds to the hospital's minority partners by MedCath in consideration for the partners' consent to the transaction that was required under the limited liability company's Operating Agreement as a condition to entering into this transaction.
"The Heart Hospital of New Mexico has demonstrated its effectiveness in delivering quality care since its opening in 1999, attending to the needs of patients suffering from cardiovascular disease throughout New Mexico, " said O. Edwin French, MedCath's president and CEO. "We're very proud of our role in working with our physician partners to help meet this need."
Navigant Capital Advisors, LLC acted as financial advisor to MedCath Corporation in connection with the sale of Arkansas Heart Hospital and the Heart Hospital of New Mexico.
MedCath will file a proxy statement with the Securities and Exchange Commission to request stockholder approval of the Arkansas Heart Hospital and Heart Hospital of New Mexico transactions. In addition to requesting stockholder approval of the Arkansas Heart Hospital and Heart Hospital of New Mexico transactions, MedCath anticipates that the proxy filing will also request stockholder approval to authorize the MedCath Board of Directors to dissolve MedCath, sell MedCath's remaining assets without further stockholder approval, and distribute available net proceeds to stockholders. As a result of undertaking the dissolution process and continuing the strategic options process, MedCath will incur wind-down expenses and will continue to incur expenses directly related to the strategic options process, the amount of which will be material. In addition, the wind-down process will require the reserving of funds for known and unknown contingent liabilities and the reserving of funds for future operating costs for any unsold assets, the amount of which may be material. MedCath currently anticipates filing the proxy statement with the Securities and Exchange Commission during its fiscal third quarter ending June 30, 2011.
MedCath Corporation, headquartered in Charlotte, N.C., is a healthcare provider focused on high acuity services with the diagnosis and treatment of cardiovascular disease being a primary service offering. MedCath owns an interest in and operates six hospitals with a total of 533 licensed beds, located in Arizona, Arkansas, California, Louisiana, New Mexico, and Texas.
Parts of this announcement contain forward-looking statements that involve risks and uncertainties including but not limited to those relating to the consummation of the sales of our interests in Arkansas Heart Hospital and the assets of Heart Hospital of New Mexico , the amount of proceeds MedCath may receive as a result of these transactions, the filing of the proxy statement, including the timing and proposals to be contained therein, expenses to be incurred by MedCath, and distributions to be made to MedCath stockholders in connection with the dissolution of the Company. Although management believes that these forward-looking statements are based on reasonable assumptions, these assumptions are inherently subject to significant economic, regulatory and competitive uncertainties and contingencies that are difficult or impossible to predict accurately and are beyond our control including, but not limited to, our ability to consummate the transactions described herein, the implementation of healthcare reform legislation and future enactment of changes in federal law that would further limit physician hospital ownership and other factors. Actual results could differ materially from those projected in these forward-looking statements. We do not assume any obligation to update these statements in a news release or otherwise should material facts or circumstances change in ways that would affect their accuracy. The preparation of MedCath's second quarter of fiscal 2011 operating results required management to make estimates and assumptions that affect reported amounts of revenues and expenses. There is a reasonable possibility that actual results may vary significantly from those estimates.
These various risks and uncertainties are described in detail in "Risk Factors" in MedCath's Annual Report or Form 10-K for the year ended September 30, 2010 filed with the Securities and Exchange Commission on December 14, 2010. Copies of our filings with the Securities and Exchange Commission, including exhibits, are available at http://www.sec.gov.
SOURCE MedCath Corporation