Metropolitan Health Networks, Inc. (NYSE AMEX: MDF),
(“Metropolitan”) and Continucare Corporation (NYSE: CNU),
(“Continucare”) announced jointly today that they have entered into
a definitive merger agreement whereby Metropolitan will acquire
Continucare in a cash and stock transaction valued at approximately
$416 million at the time of announcement. The transaction will
create a company that provides care to over 68,000 Medicare
Advantage and Medicaid customers. The combined company will own 31
primary care medical practices, utilize a network of more than 250
contracted, independent, primary care practices, and will operate
in 18 Florida counties, including the Daytona, Miami, Ft.
Lauderdale, West Palm Beach, and Tampa metropolitan areas.
Under the terms of the merger agreement, each share of
Continucare common stock will receive $6.25 per share in cash, and
0.0414 of a share of Metropolitan common stock, which, based upon
the share price at the time of announcement, is equal to
approximately $0.20. The exact value of the consideration per share
will depend on Metropolitan’s share price at closing. Metropolitan
expects to issue approximately 2.7 million shares in
connection with the pending transaction.
The transaction was unanimously approved by the Board of
Directors of Metropolitan. Continucare’s Board of Directors also
unanimously approved the merger agreement and has recommended that
Continucare’s shareholders approve the merger agreement and the
transactions contemplated thereby. In addition, Phillip Frost,
M.D., and other shareholders affiliated with Dr. Frost, who
collectively own approximately 43% percent of Continucare stock,
have agreed to vote their shares in favor of the merger. A vote of
a majority of Continucare’s outstanding common stock will be
required to approve the merger agreement. The transaction is
expected to close in the third calendar quarter of 2011 and is
subject to standard closing conditions, including clearance under
the Hart-Scott-Rodino Act.
To fund the cash component of the purchase price, Metropolitan
plans to use some of its and Continucare’s cash and investments,
which combined totaled $93 million at March 31, 2011, and has
secured a fully underwritten financing commitment from one of the
leading health care lenders, GE Capital, Healthcare Financial
Services and its affiliates, to arrange approximately $355 million
in new credit facilities. In connection with the financing, GE
Capital Markets will serve as Sole Book Runner and Sole Lead
Arranger for the debt financing.
The combination of Metropolitan and Continucare will create a
company with approximately $660 million in annual revenue, based
upon their respective results for the twelve months ended March 31,
2011, and over $90 million in earnings before interest, taxes,
depreciation and amortization (EBITDA) for the same period.
Metropolitan projects annual cost savings principally from the
elimination of public company-related expenses as well as the
elimination of certain executive level positions, and that the
transaction will be accretive in 2012.
“Continucare is viewed as an accretive and a
highly complementary acquisition for Metropolitan…” commented
Michael Earley, Metropolitan’s Chairman and CEO.
“In keeping with our mandate to achieve both organic and
acquired growth, it gives us great pleasure to make today’s
announcement,” commented Michael Earley, Chairman and Chief
Executive Officer of Metropolitan Health Networks, Inc. “For many
years Continucare and Metropolitan have each worked diligently in
their respective regions throughout Florida to establish high
quality and profitable primary care networks and operations that
serve Medicare Advantage customers, and in the case of Continucare,
Medicaid customers as well. Each of our organizations have
independently cultivated businesses that have little overlap and
provide exemplary primary care to seniors and others in one of
Florida’s fastest growing industries. Continucare is viewed as an
accretive and a highly complementary acquisition for Metropolitan,
one that we would be proud to culminate,” Earley stated.
While Metropolitan expects to achieve moderate savings through
the elimination of certain Continucare public company expenses and
the elimination of certain executive leadership positions, it is
anticipated that the Continucare operational staff and employees
will remain virtually intact as the two organizations integrate and
the combined company positions itself for the potential of
significant future growth as a combined entity.
“Our two companies align nicely to provide
health care solutions for customers in the Medicare and Medicaid
markets…” states Earley.
“Our two companies align nicely to provide health care solutions
for customers in the Medicare and Medicaid markets, markets which
are expected to grow significantly, nationwide, during the next
decades. The pairing of Continucare with Metropolitan represents an
attractive platform to address not only the growing seniors market
in Florida, but the potential for out of state expansion as well.
Additionally, with Florida Medicaid soon to be under the managed
care umbrella, the potential for growth expands even more. Together
the companies have the size and scale required to address these
markets most efficiently and we expect that there will be
significant employment growth opportunities under the Metropolitan
operational model,” Earley concluded.
“This transaction brings resources to our
customers and value to our shareholders, while providing stability
to the employees of both of our companies…” commented Richard
Pfenniger, Chairman, CEO, and President of Continucare.
“Metropolitan and Continucare have established themselves as
outstanding providers of care for their patients and have very
limited geographic overlap in service offerings. As our industry
has evolved, we have sharpened our focus on providing the best
possible care to our patients while continuing to create value to
our shareholders,” commented Richard Pfenniger, Chairman, Chief
Executive Officer, and President of Continucare. “We expect that
this transaction will bring resources to our customers and value to
our shareholders, while providing stability to the employees of
both of our companies, as they continue on a combined growth plan,”
Pfenniger added. “It’s a great day for all parties involved in this
transaction,” he concluded.
“With minimal overlap, we plan to use the
human resource capital that the Continucare team has to offer…”
commented Dr. Jose Guethon, Metropolitan’s President and COO.
“Metropolitan currently operates in 16 counties, with our
largest markets being the Daytona market area in Volusia and
Flagler Counties. Approximately 31% of our customers are being
cared for through our 13 wholly owned medical practices, with the
remainder receiving care through our network of affiliated
physician offices. Continucare operates in a complementary fashion
with the majority of their customers receiving care through their
18 wholly owned operations in Miami-Dade, Broward and Hillsborough
counties, areas in which we have little in the way of facilities or
staffing. With minimal overlap, we plan to use the human resource
capital that the Continucare team has to offer,” commented Jose A.
Guethon, MD, MBA, President and Chief Operating Officer of
Metropolitan Health Networks, Inc. “The combination of our two
organizations is viewed as strategically and operationally
attractive,” Guethon concluded.
Upon completion of the acquisition, Michael Earley will continue
to serve as Chief Executive Officer and Chairman of the Board of
Directors of Metropolitan, Dr. Jose Guethon will remain as its
President and Chief Operating Officer, and Robert Sabo, as its
Chief Financial Officer. Reporting to Dr. Guethon, Gemma Rosello,
Continucare’s current Executive Vice President of Operations, will
continue with Metropolitan in the capacity of President of
Continucare Corporation, a wholly-owned subsidiary.
Metropolitan is suspending its current share repurchase program
pending the completion of the transaction.
Morgan Joseph TriArtisan LLC is acting as financial advisor to
Metropolitan. Greenberg Traurig, LLP is acting as legal advisor to
Metropolitan.
UBS Investment Bank and Barrington Research Associates, Inc. are
acting as financial advisors to Continucare. Akerman Senterfitt is
acting as legal advisor to Continucare.
Paul Hastings, LLC is acting as legal advisor to GE Capital.
Conference Call Information:
Metropolitan Health Networks and Continucare will hold a joint
conference call to review the acquisition on Monday, June 27, 2011
at 11:00 a.m. Eastern. The call will be hosted by Michael Earley,
Chairman and CEO of Metropolitan and Richard C. Pfenniger, Jr.,
Chairman, CEO, and President of Continucare. Interested parties may
access the conference call by dialing the following numbers: (866)
804-6925 (domestic) or (857) 350-1671 (international), pass code #
19772956. The call will also be available via web cast at the
following links:
http://phx.corporate-ir.net/playerlink.zhtml?c=98603&s=wm&e=4143104
www.metcare.com,
www.continucare.com,
http://www.streetevents.com,
http://www.fulldisclosure.com
An audio replay of the call will be available on June 27, 2011
at 2:00 p.m. Eastern through to 11:59 p.m. Eastern on July 4, 2011,
via the Metropolitan web site or by dialing (888) 286-8010 or (617)
801-6888 - Access code # 12265150.
Forward Looking Statements:
Except for historical matters contained herein, statements made
in this document are forward-looking and are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform
Act of 1995. Without limiting the generality of the foregoing,
words such as “may,” “will,” “to,” “plan,” “expect,” “believe,”
“anticipate,” “intend,” “could,” “would,” “estimate,” or “continue”
or the negative other variations thereof or comparable terminology
are intended to identify forward-looking statements. Such
forward-looking statements include, but are not limited to,
statements about the anticipated benefits of the merger, including
financial and operating results and benefits that may be realized
from the merger, Metropolitan’s and Continucare’s plans,
objectives, expectations and intentions and other statements
contained in this document that are not historical facts. Such
forward-looking statements are inherently uncertain. Accordingly,
you should not place any undue reliance on any of the
forward-looking statements in this document, which are subject to
numerous risks and uncertainties, and you should consider all of
such information in light of the various risks identified in this
document and in the reports filed by Metropolitan and Continucare
with the SEC, as well as the other information that Metropolitan
and Continucare provide with respect to the pending merger.
Investors and others are cautioned that a variety of factors,
including the following, among others, could cause actual results
to differ from those set forth in the forward-looking statements:
(i) the proposed merger may not be consummated for a number of
reasons, including as a result of the occurrence of any event,
change or other circumstances that could give rise to the
termination of the merger agreement, and Metropolitan and
Continucare will incur significant fees and expenses regardless of
whether the merger is consummated; (ii) if the merger is not
consummated under certain specified circumstances, Metropolitan or
Continucare may be required to pay the other a termination fee of
up to $12 million, plus up to $1.5 million in fees and expenses;
(iii) the receipt of all required regulatory approvals and the
satisfaction of the closing conditions to the proposed merger,
including approval of the pending transaction by the shareholders
of Continucare, and Metropolitan’s ability to complete the required
financing as contemplated by the financing commitment;
(iv) Metropolitan’s ability to integrate the operations of
Continucare and realize the anticipated revenues, economies of
scale and cost synergies in connection with the transaction,
including the potential for unanticipated issues, expenses and
liabilities associated with the merger and the risk that
Continucare fails to meet its expected financial and operating
targets; (v) the potential for diversion of management time
and resources in seeking to complete the merger and integrate the
operations of Continucare; (vi) the potential failure to
retain key employees of Continucare; (vii) the impact of
Metropolitan’s significantly increased levels of indebtedness as a
result of the transaction on Metropolitan’s funding costs,
operating flexibility and ability to fund ongoing operations with
additional borrowings, particularly in light of ongoing volatility
in the credit and capital markets; (viii) the potential for
dilution to Metropolitan shareholders as a result of the
transaction; and (ix) the ability of Metropolitan to operate
pursuant to the terms of its debt obligations, including its
obligations under financings undertaken to complete the Continucare
transaction. Metropolitan and Continucare are also subject to the
risks and uncertainties described in their respective filings with
the SEC, including Metropolitan’s Annual Report on Form 10-K for
the year ended December 31, 2010, and its Quarterly Report on Form
10-Q for the quarter ended March 31, 2011, and Continucare’s Annual
Report on Form 10-K for the fiscal year ended June 30, 2010, and
its Quarterly Reports on Form 10-Q for the quarters ended September
30, 2010, December 31, 2010 and March 31, 2010. Metropolitan and
Continucare disclaim any obligation to update and revise statements
contained in this document based on new information or
otherwise.
Additional Information about this
Transaction
This press release shall not constitute an offer of any
securities for sale. In connection with the pending transaction
with Continucare, Metropolitan will file with the SEC a
Registration Statement on Form S-4 that will include a proxy
statement of Continucare that also constitutes a prospectus of
Metropolitan. Continucare will mail the definitive proxy
statement/prospectus to its stockholders. WE URGE INVESTORS AND
SECURITY HOLDERS TO READ THE PROXY STATEMENT/PROSPECTUS REGARDING
THE PENDING TRANSACTION WHEN IT BECOMES AVAILABLE BECAUSE IT WILL
CONTAIN IMPORTANT INFORMATION. You may obtain a free copy of
the proxy statement/prospectus (when available) and other related
documents filed by Metropolitan and Continucare with the SEC at the
SEC’s website at www.sec.gov. The proxy statement/prospectus (when
available) and the other documents filed by Metropolitan and
Continucare with the SEC may also be obtained for free by accessing
Metropolitan’s website at www.metcare.com and clicking on the
“Investors” link then clicking on the link for “SEC Filings” or by
accessing Continucare’s website at www.continucare.com and clicking
on the “Investor Relations” link and then clicking on the link for
“SEC Filings.
” Copies of the proxy statement/prospectus and the filings with
the SEC that will be incorporated by reference in the proxy
statement/prospectus can also be obtained, free of charge, by
directing a request to Metropolitan, 777 Yamato Road, Suite 510,
Boca Raton, Florida 33431 Attention: Al Palombo, or to Continucare,
7200 Corporate Center Drive, Suite 600, Miami, Florida 33126,
Attention: Fernando Fernandez.
Participants in this
Transaction
Continucare, Metropolitan and their respective directors,
executive officers and certain other members of management and
employees may be deemed to be participants in the solicitation of
proxies from shareholders of Continucare in favor of the pending
transaction. Information regarding the persons who may, under the
rules of the SEC, be considered participants in the solicitation of
shareholders in connection with the pending transaction will be set
forth in the proxy statement/prospectus when it is filed with the
SEC. You can find information about Continucare’s executive
officers and directors in its definitive proxy statement filed with
the SEC on January 20, 2011. You can find information about
Metropolitan’s executive officers and directors in its definitive
proxy statement filed with the SEC on May 2, 2011. You can obtain
free copies of these documents from Continucare or Metropolitan,
respectively, using the contact information above.
About Metropolitan Health Networks, Inc.:
Metropolitan is a growing health care organization that provides
comprehensive health care services for Medicare Advantage members
and other patients in Florida. To learn more about Metropolitan
Health Networks, Inc. please visit its website at
www.metcare.com.
About Continucare Corporation:
Continucare provides primary care physician services on an
outpatient basis through a network of medical facilities.
Continucare has 18 well-appointed medical offices equipped with
state-of-the-practice technology and staffed with experienced
physicians and a comprehensive support staff. In addition,
Continucare provides medical management services to independent
primary physician affiliates in South Florida, assisting them with
medical utilization, pharmacy management and specialist network
development, thereby allowing them more time for patient care.
Also, through its subsidiary, Seredor Corporation, Continucare
operates or manages more than 70 sleep diagnostic centers in 15
states. For more information please visit www.continucare.com.
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