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Leonard Green Buying Prospect Medical

Leonard Green & Partners has agreed to acquire Prospect Medical Holdings Inc. (Nasdaq: PZZ), operator of five community-based hospitals in the greater Los Angeles area. The deal is valued at approximately $363 million, including the assumption of approximately $158 million in debt. Prospect stockholders will receive $8.50 per share.


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 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 12¾% 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.

UBS Investment Bank is acting as financial advisor to the Special Committee and Locke Lord Bissell & Liddell LLP is acting as legal advisor to the Special Committee. TroyGould PC is acting as legal advisor to Prospect. Latham & Watkins LLP is acting as legal advisor to Leonard Green & Partners, L.P.

About Prospect

Prospect Medical Holdings owns and operates five community-based hospitals in the greater Los Angeles area, and manages the provision of healthcare services of HMO enrollees in southern California, through its network of specialist and primary care physicians. Prospect Medical Holdings’ website can be found at

About Leonard Green & Partners, L.P.

Leonard Green & Partners is one of the nation’s leading private equity firms with over $9 billion in equity commitments under management, was founded in 1989, and has invested in 51 companies with an aggregate value in excess of $42 billion. The firm’s investments are focused primarily on North American companies in a range of industries including retail, consumer products, distribution, media, business services and healthcare. Additional information is available at