Concentra and U.S. Healthworks to merge

Select Medical and Dignity Health have agreed to merge Concentra and U.S. Healthworks. The deal will put U.S. Healthworks as a valuation of $753 million. According to terms of the transaction, Concentra will acquire all of the issued and outstanding shares of stock of U.S. HealthWorks from DHHC. After the closing, Dignity Health will take a 20 percent stake in the combined company valued at $238 million. U.S. HealthWorks is an operator of occupational healthcare centers while Concentra was formed as a joint venture between Select Medical Corp, a subsidiary of Select Medical, Welsh, Carson, Anderson & Stowe and other minority equity holders that include Cressey & Company.

PRESS RELEASE

MECHANICSBURG, Pa. and SAN FRANCISCO, Oct. 23, 2017 /PRNewswire/ — Select Medical Holdings Corporation (“Select Medical”) (NYSE: SEM) and Dignity Health today announced the signing of a definitive agreement to combine Concentra Group Holdings, LLC (“Concentra”), an occupational medicine and urgent care service provider, with U.S. HealthWorks, Inc. (“U.S. HealthWorks”), a subsidiary of Dignity Health Holdings Company (“DHHC”), also a service provider in this sector. This partnership will strengthen the delivery of care through greater access and standardization of best practices improving the health and wellness services for employers and employees.

Subject to the satisfaction of closing conditions, the transaction will occur through an equity purchase and contribution agreement (the “Purchase Agreement”), whereby Concentra will acquire all of the issued and outstanding shares of stock of U.S. HealthWorks from DHHC. Following the closing of the transaction, Dignity Health will own a 20% equity interest in the combined entity holding Concentra and U.S. HealthWorks.

U.S. HealthWorks is an operator of occupational healthcare centers with approximately 250 medical and onsite clinics in 21 states. Concentra was created through a joint venture between Select Medical Corporation, a wholly-owned subsidiary of Select Medical (“SMC”), Welsh, Carson, Anderson & Stowe XII, L.P. (“WCAS”) and other minority equity holders including Cressey & Company (“Cressey”).

Earlier this year, Select Medical and Dignity Health formed a joint venture to construct and operate a 60-bed acute inpatient rehabilitation hospital in the greater Las Vegas, Nevada, metro area, expected to open in 2019. That agreement also includes joint operation of 12 outpatient rehabilitation clinics in the Las Vegas area. This partnership will expand upon the relationship.

“We are excited about our partnership with Dignity Health, which enables us to join forces and deliver best-in-class occupational medicine and urgent care to communities and corporate work sites nationwide,” said Robert A. Ortenzio, Executive Chairman and Co-Founder of Select Medical. “Together, we will provide high-value, outcome-based care for thousands of patients every day.”

“Caring for America’s workforce creates a healthier population which means more productivity for business, a stronger economy, and connected communities,” said Daniel Morissette, Dignity Health’s Senior Executive Vice President/Chief Financial Officer. “Combining the two organizations will strengthen the delivery of clinical care, standardize best practices and improve service for employers and employees.”

The transaction values U.S. HealthWorks at $753 million, subject to certain adjustments in accordance with the terms set forth in the Purchase Agreement. Dignity Health will receive a 20% equity interest in the combined entity, valued at $238 million, and the remainder of the purchase price in cash. In connection with closing the transaction, Concentra will also redeem certain of its outstanding equity interests from the existing minority equity holders (including WCAS and Cressey), such that SMC will retain a majority voting interest in the combined entity following the closing of the transaction. The transaction, which is targeted to close in the first quarter of 2018, is subject to a number of closing conditions, including clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

Select Medical began operations in 1997 and has grown to be one of the largest operators of specialty hospitals, outpatient rehabilitation clinics, and occupational health centers in the United States based on the number of facilities. As of June 30, 2017, Select Medical operated 102 long term acute care hospitals and 21 acute medical rehabilitation hospitals in 28 states and 1,608 outpatient rehabilitation clinics in 37 states and the District of Columbia. Select Medical’s joint venture subsidiary, Concentra, operated 315 occupational health centers in 38 states. Concentra also provides contract services at employer worksites and Department of Veterans Affairs community-based outpatient clinics. At June 30, 2017, Select Medical had operations in 46 states and the District of Columbia. Information about Select Medical is available at www.selectmedical.com.
Dignity Health is one of the nation’s largest health care systems. As of June 30, 2017, Dignity Health operated more than 400 care centers, including hospitals, urgent and occupational care, imaging and surgery centers, home health, and primary care clinics in 22 states, through its network of more than 9,000 physicians and 63,000 employees. Headquartered in San Francisco, CA, Dignity Health is dedicated to providing compassionate, high-quality, and affordable patient-centered care with special attention to the poor and underserved. In its fiscal year ended June 30, 2017, Dignity Health provided $2.6 billion in charitable care and services. More information on Dignity Health is available at www.dignityhealth.org.

Goldman Sachs & Co. served as exclusive financial advisor, and Jones Day served as legal advisor, to Dignity Health in connection with the transaction. Dechert LLP served as legal advisor to Concentra and Select Medical in connection with the transaction.