HealthSouth To Sell Surgery Division To TPG
Rehabilitation chain HealthSouth said Monday it has agreed to sell its surgery division for about $920 million in cash plus a stake in the surgery business, its second major divestiture this year as it restructures after a major financial scandal.
The sale to TPG, a private equity firm, includes an equity stake in a newly formed company that will operate the surgery business. HealthSouth estimates the equity interest will be worth between $25 million and $30 million in five years, pushing its estimate of the value of the deal to $945 million.
In January, HealthSouth agreed to sell about 600 outpatient rehabilitation centers to Select Medical Corp. for $245 million.
Still trying to recover from a $2.7 billion accounting fraud that drove it to the edge of bankruptcy, the Birmingham-based chain plans to focus solely on post-acute care in the future.
Chief executive Jay Grinney called the sale of the surgical division a "major milestone" for HealthSouth.
"The proceeds from this transaction will be used to pay down a significant portion of our long-term debt, thereby strengthening our balance sheet and positioning us to grow our core business," said Grinney, who took over after the fraud.
Some of HealthSouth's senior management team, including chief operating officer Mike Snow and the president of the surgery division, Joe Clark, will leave HealthSouth to join the newly formed company, which is expected to remain headquartered in Birmingham.
The surgery division consists of a network of 139 outpatient surgery centers and three surgical hospitals. The network covers 35 states, with operations concentrated in California, Texas, Florida, North Carolina and Alabama.
TPG, or Texas Pacific Group, was founded in 1992 and manages more than $30 billion in assets.
The transaction is expected to close in the third quarter this year, subject to customary conditions and regulatory approval. Goldman Sachs acted as financial adviser for the deal.
Fifteen former executives pleaded guilty in HealthSouth's fraud case, and another was convicted by jurors. Former CEO Richard Scrushy was acquitted of charges in the accounting scandal but is awaiting sentencing for a conviction in a separate government bribery case.