EMS Transaction Fee Has Investors Up In Arms

Investors in Emergency Medical Services Corp. are scratching their heads with one hand and calling their lawyers with the other as they try to understand how the company paid $300 million in “transaction costs” for its $3.2 billion leveraged buyout and why those costs were included in the purchase price.

Questions were raised Monday morning on the deal’s size and why it didn’t equate to a seemingly higher share price (there is little debt and so $3.2 billion over 45.5 million shares would seem to yield a stock price of $70, not the $64 a share that EMS shareholders received.)

Later in the day (as we first told you on The Strategy Session) the company put out a press release saying the deal price included $300 million in transaction costs with no explanation of why those costs dwarf any such costs on a deal of this size, for which, transaction fees might typically amount to $30 million.

Given the company is not returning calls and bankers have yet to furnish me with details, one can only assume that the “costs” must include some kind of payment to Onex Corp, which owns 31 percent of the company (Onex is already realizing roughly 10 times its invested capital) and has a management agreement that pays it a couple of million dollars a year. That is speculation.

We simply don’t know what comprises the costs in question. We do know that Onex controls the vote in this deal (it has 80 percent of the voting shares) and is voting in favor.

We also know that shareholders who awoke to a deal worth $3.2 billion and expected that would mean roughly $70 a share are trying to understand how transaction costs in this deal amounted to $6.50 a share.

More as I get it.

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