EmailMetropolitan Health Networks (MDF $4.60 -0.28) and Continucare Corp (CNU $6.28 +1.51) have entered into a definitive merger agreement whereby Metropolitan will acquire Continucare in a cash and stock transaction valued at ~$416 mln at the time of announcement. 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 ~$0.20 (~35% premium).
The exact value of the consideration per share will depend on Metropolitan's share price at closing. Metropolitan expects to issue ~2.7 mln 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 ~43% percent of Continucare stock, have agreed to vote their shares in favor of the merger. 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 mln 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 ~$355 mln in new credit facilities.
Metropolitan projects annual cost savings principally from the elimination of public co-related expenses as well as the elimination of certain executive level positions, and that the transaction will be accretive in 2012. While Metropolitan expects to achieve moderate savings through the elimination of certain Continucare public co 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 co positions itself for the potential of significant future growth as a combined entity. Metropolitan is suspending its current share repurchase program pending the completion of the transaction.
