MECHANICSBURG, Penn., Jan. 3, 2024
/PRNewswire/ -- Select Medical Holdings Corporation ("Select
Medical," "we," "us," or "our") (NYSE: SEM) today announced that
its board of directors has approved a plan to pursue the separation
of Select Medical's wholly-owned occupational health services
business, Concentra Group Holdings Parent, LLC ("Concentra" and
such business, the "Concentra business"). If consummated, the
potential separation would create two independent, publicly traded
companies positioned for continued growth and market leadership.
The potential separation aims to increase stockholder value and
focus each company's strategic priorities on its respective
marketplace.
The potential separation is intended to be effected in a
tax-free manner to Select Medical and its stockholders and be
completed in late 2024.
Potential Separation Transaction Details
It is expected that after the separation, if consummated, Select
Medical's stockholders will retain their current shares of Select
Medical and also receive a pro rata distribution of Concentra stock
in a transaction that is intended to be tax free to Select Medical
and its stockholders for U.S. federal income tax purposes. The
number of shares to be distributed and the specific transaction
structure will be determined before the potential separation is
complete.
In connection with the proposed transaction, it is contemplated
that Concentra would complete one or more financing transactions,
the net proceeds from which will be used to repay intercompany debt
or otherwise be distributed to Select Medical Corporation, and
which will be used by Select Medical Corporation to repay a portion
of its outstanding indebtedness.
Select Medical is committed to establishing strong capital
allocation strategies for each business that align with each
businesses' long-term goals. Further details about capital
structure, governance and other elements of the potential
separation will be announced later.
Robert A. Ortenzio, Executive
Chairman and Co-Founder of Select Medical, stated, "The board and
management team regularly evaluate strategic alternatives to
maximize stockholder value, while supporting our overall mission –
providing an exceptional patient care experience that promotes
healing and recovery in a compassionate environment. We are
pursuing the potential separation of Concentra with the objective
of enhancing success of each business by creating two companies
that will be leaders in their respective markets."
Private Letter Ruling and Other Conditions
As an initial measure, Select Medical has requested a private
letter ruling from the U.S. Internal Revenue Service with respect
to the tax-free status of the potential separation of the Concentra
business.
The completion of the potential separation is subject to
customary conditions, including favorable market conditions,
completion of the necessary financing transactions, receipt of a
private letter ruling and tax opinion, and final approval by the
Select Medical board of directors. There can be no assurance
regarding the timing of the potential separation, the specific
terms or its completion.
Advisors
J.P. Morgan is serving as Select Medical's exclusive financial
advisor, and Dechert LLP is serving as Select Medical's legal
counsel.
About Concentra
Concentra is the largest provider of occupational health
services in the United States. As
of September 30, 2023, Concentra
operated 539 stand-alone occupational health centers and 135 onsite
clinics at employer worksites throughout 41 states. Concentra
delivers occupational health services, consumer health, and other
direct-to-employer care in its occupational health centers,
virtually through its telemedicine program, and in its onsite
clinics located at the workplaces of employer customers.
Concentra's occupational health services include workers'
compensation injury and physical rehabilitation care as well as
employer services consisting of substance abuse testing, physical
exams, clinical testing, and preventive care. Consumer health
consists of patient-directed urgent care treatment of injuries and
illnesses. Direct-to-employer services consist of the services
described above as well as advanced primary care at Concentra's
onsite clinics.
About Select Medical
Select Medical is one of the largest operators of critical
illness recovery hospitals, rehabilitation hospitals, outpatient
rehabilitation clinics, and occupational health centers in
the United States based on number
of facilities. Select Medical's reportable segments include the
critical illness recovery hospital segment, the rehabilitation
hospital segment, the outpatient rehabilitation segment, and the
Concentra segment. As of September 30,
2023, Select Medical operated 107 critical illness recovery
hospitals in 28 states, 33 rehabilitation hospitals in 13 states,
1,946 outpatient rehabilitation clinics in 39 states and the
District of Columbia, and 539
occupational health centers in 41 states. At September 30, 2023, Select Medical had operations
in 46 states and the District of
Columbia. Information about Select Medical is available at
www.selectmedical.com.
Forward-Looking Statements
Certain statements contained herein that are not descriptions of
historical facts are "forward-looking" statements (as such term is
defined in the Private Securities Litigation Reform Act of 1995),
including statements related to Select Medical's evaluation of
various strategic alternatives such as a separation or divestiture
of the Concentra business. The words "believe," "continue,"
"could," "expect," "anticipate," "intends," "estimate," "forecast,"
"project," "should," "may," "will," "would" or the negative thereof
and similar expressions are intended to identify such
forward-looking statements. Because such statements include risks
and uncertainties, actual results may differ materially from those
expressed or implied by such forward-looking statements due to
factors including the following:
- adverse economic conditions including an inflationary
environment could cause us to continue to experience increases in
the prices of labor and other costs of doing business resulting in
a negative impact on our business, operating results, cash flows,
and financial condition;
- shortages in qualified nurses, therapists, physicians, or other
licensed providers, and/or the inability to attract or retain
qualified healthcare professionals could limit our ability to staff
our facilities;
- shortages in qualified health professionals could cause us to
increase our dependence on contract labor, increase our efforts to
recruit and train new employees, and expand upon our initiatives to
retain existing staff, which could increase our operating costs
significantly;
- the continuing effects of the COVID-19 pandemic including, but
not limited to, the prolonged disruption to the global financial
markets, increased operational costs due to recessionary pressures
and labor costs, additional measures taken by government
authorities and the private sector to limit the spread of COVID-19,
and further legislative and regulatory actions which impact
healthcare providers, including actions that may impact the
Medicare program;
- changes in government reimbursement for our services and/or new
payment policies may result in a reduction in revenue, an increase
in costs, and a reduction in profitability;
- the failure of our Medicare-certified long term care hospitals
or inpatient rehabilitation facilities to maintain their Medicare
certifications may cause our revenue and profitability to
decline;
- the failure of our Medicare-certified long term care hospitals
and inpatient rehabilitation facilities operated as "hospitals
within hospitals" to qualify as hospitals separate from their host
hospitals may cause our revenue and profitability to decline;
- a government investigation or assertion that we have violated
applicable regulations may result in sanctions or reputational harm
and increased costs;
- acquisitions or joint ventures may prove difficult or
unsuccessful, use significant resources, or expose us to unforeseen
liabilities;
- our plans and expectations related to our acquisitions and our
ability to realize anticipated synergies;
- private third-party payors for our services may adopt payment
policies that could limit our future revenue and profitability;
- the failure to maintain established relationships with the
physicians in the areas we serve could reduce our revenue and
profitability;
- competition may limit our ability to grow and result in a
decrease in our revenue and profitability;
- the loss of key members of our management team could
significantly disrupt our operations;
- the effect of claims asserted against us could subject us to
substantial uninsured liabilities;
- a security breach of our or our third-party vendors'
information technology systems may subject us to potential legal
and reputational harm and may result in a violation of the Health
Insurance Portability and Accountability Act of 1996 or the Health
Information Technology for Economic and Clinical Health Act;
- failure to complete or achieve some or all the expected
benefits of the potential separation of Concentra; and
- other factors discussed from time to time in our filings with
the Securities and Exchange Commission (the "SEC"), including
factors discussed under the heading "Risk Factors" of our quarterly
reports on Form 10-Q and in our annual report on Form 10-K for the
year ended December 31, 2022.
Except as required by applicable law, including the securities
laws of the United States and the
rules and regulations of the SEC, we are under no obligation to
publicly update or revise any forward-looking statements, whether
as a result of any new information, future events, or otherwise.
You should not place undue reliance on our forward-looking
statements. Although we believe that the expectations reflected in
forward-looking statements are reasonable, we cannot guarantee
future results or performance.
Investor inquiries:
Joel T. Veit
Senior Vice President and Treasurer
717-972-1100
ir@selectmedical.com
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SOURCE Select Medical Holdings Corporation