Select Medical Surges on Take-Private Bid from Executive Chairman
Co-founder Robert Ortenzio offers $16.00-$16.20 per share, a premium of up to 19%, prompting the formation of a special committee to evaluate the proposal.
Shares of Select Medical Holdings (NYSE: SEM) jumped in morning trading after the company received a non-binding proposal from its co-founder and Executive Chairman, Robert A. Ortenzio, to take the healthcare provider private.
The offer proposes to acquire all outstanding shares of Select Medical for a cash price between $16.00 and $16.20 per share. This represents a significant premium of approximately 17% to 19% over the company's closing price of $13.65 on the day prior to the announcement. Following the news, the company's stock rose around 2.6% to trade at $14.01, valuing the company at roughly $1.74 billion.
In response to the offer, Select Medical announced that the disinterested members of its Board of Directors will form a special committee to thoroughly review and evaluate the proposal. The company cautioned in a statement released via PR Newswire that the proposal is non-binding and that no definitive agreement has been reached.
The stock's current trading price, while higher, remains well below the proposed acquisition range, suggesting a degree of investor uncertainty about the deal's eventual success or final terms. A gap between the offer price and the market price often reflects risks such as regulatory hurdles, financing contingencies, or the possibility that the special committee will reject the offer.
Select Medical, based in Mechanicsburg, Pennsylvania, is a major operator of specialized healthcare facilities, including critical illness recovery hospitals, rehabilitation hospitals, and outpatient rehabilitation clinics across the United States. The company has played a key role in the post-acute care sector since its founding in 1996 by Mr. Ortenzio and his father, Rocco Ortenzio.
The move by a company's own chairman to take it private is often seen as a signal that insiders believe the firm's long-term value is not fully reflected in its public market valuation. According to an SEC Schedule 13D filing, Mr. Ortenzio is initiating this process to explore the feasibility of such a transaction. Insider ownership at Select Medical stands at approximately 15%.
Analysts have set an average 12-month price target of $18.17 for Select Medical, which is notably above the top end of Mr. Ortenzio's offer. This discrepancy could become a key negotiating point for the special committee, which has a fiduciary duty to secure the best possible value for all shareholders. The committee will likely engage independent financial and legal advisors to assess the fairness of the offer against the company's standalone strategic plan and long-term prospects.
The healthcare services industry has seen continued interest from private equity and strategic buyers, who are often attracted to the stable cash flows and demographic tailwinds of an aging population. Taking a company private allows management to execute long-term strategies without the quarter-to-quarter pressures of public market scrutiny.
Investors will now be closely watching for the formal establishment of the special committee and any subsequent announcements regarding its evaluation process. The committee's recommendation will be the critical next step in determining whether Select Medical will leave the public markets under the leadership of one of its original founders.