MECHANICSBURG, Pa. - Select Medical (NYSE:SEM) Holdings Corporation (NYSE: SEM) and Concentra Group Holdings Parent, Inc. have announced the pricing of a $650 million senior notes offering by Concentra Escrow Issuer Corporation, a step toward the planned separation of Concentra, Select's occupational health services business. The 6.875% senior notes, due in 2032, are part of Select's strategy to pursue a spinoff of Concentra.
The offering's proceeds will be held in escrow until the expected completion of the merger between Concentra Escrow Issuer Corporation and Concentra Health Services, Inc., anticipated in the third quarter of 2024. If the merger does not occur by September 30, 2024, the notes will be redeemed at their initial issue price plus accrued interest.
Concentra aims to allocate $50 million from the offering for corporate purposes and use the remainder, along with funds from new senior secured credit facilities, to pay a dividend to Select Medical Corporation. The notes and guarantees are offered privately to qualified institutional buyers and non-U.S. persons in compliance with securities regulations.
This financial move is not without risks, as detailed in the cautionary statement regarding forward-looking statements, which emphasizes that the statements are not guarantees of future performance and involve known and unknown risks.
The completion of the merger and the separation of Concentra are subject to various conditions, including additional financing, and there are no assurances provided that these events will occur as planned.
The notes have not been registered under the Securities Act or any state securities laws and may not be offered or sold in the United States without registration or an applicable exemption from registration requirements. This article is based on a press release statement and does not constitute an offer to sell or a solicitation of an offer to buy any securities.
In other recent news, Select Medical Holdings Corporation and its subsidiary, Concentra, have launched a $750 million senior notes offering, a move that is part of a broader plan to separate Concentra from Select Medical Holdings.
The senior notes are due in 2032 and the proceeds will be placed in escrow until the completion of a proposed merger. The company plans to allocate $50 million from the net proceeds for general corporate expenses and use the remaining funds to pay a dividend to Select Medical Corporation.
Following an impressive first-quarter performance, Select Medical has been the focus of positive assessments from analysts at Benchmark and RBC (TSX:RY) Capital. Both firms have raised their price targets for Select Medical, reflecting the company's robust Q1 results and an improved outlook for the full year 2024. Select Medical's Critical Illness Recovery hospitals experienced a significant 51% growth in segment EBITDA, contributing to the company's overall strong performance.
In addition to these developments, Select Medical has announced a 22% increase in adjusted EBITDA and a 7% increase in revenue year-over-year in the first quarter. The company's critical illness recovery hospital division performed notably well, with a 51% rise in adjusted EBITDA. The board declared a dividend, and plans for expansion include new hospital openings and adding 537 beds by 2026.
Finally, Concentra, the occupational health services business, is moving towards an IPO following a favorable IRS ruling. The separation is expected to be completed by the end of 2024. These recent developments highlight Select Medical's strategic management and resilience in the face of industry challenges.
InvestingPro Insights
Select Medical Holdings Corporation (NYSE: SEM) appears to be navigating its financial strategy with a focus on growth and shareholder value. The planned spinoff of Concentra, evidenced by the recent senior notes offering, is a strategic move that could potentially unlock value for the company and its investors. The real-time data from InvestingPro provides a deeper look into the company's financial health and market performance as of the first quarter of 2024.
InvestingPro Data indicates a market capitalization of $4.39 billion, reflecting the company's substantial size in its sector. With a P/E ratio of 16.02, which adjusts slightly higher to 16.38 on a last twelve months basis, Select Medical Holdings trades at a valuation that could be considered reasonable relative to its earnings. Moreover, the company has demonstrated revenue growth of 6.08% over the last twelve months, suggesting a steady increase in its financial performance.
Two InvestingPro Tips highlight the potential investment appeal of Select Medical Holdings. Firstly, the company is trading at a low P/E ratio relative to near-term earnings growth, which might attract investors looking for value opportunities. Secondly, the stock has shown a strong return of 20.55% over the last three months, indicating robust recent performance that could catch the eye of momentum investors.
For those interested in further analysis and additional InvestingPro Tips, including insights on earnings revisions and price volatility, more information is available at https://www.investing.com/pro/SEM. There are 9 additional InvestingPro Tips listed for Select Medical Holdings Corporation, which can be accessed with an exclusive offer. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking a wealth of investment knowledge and data-driven insights.
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