Second of two parts
Re “A Brotman Ownership Shift as ‘Green & Partners’ Moves in”
On the day after Brotman Medical Center’s shakeup of its partnership roster became widely known, through a Los Angeles Business Journal story, the precise dimensions and motivations remain veiled.
Hardly anyone is talking.
“Looks to me as if Prospect is going along for a good ride,” was one financial observer’s favorable sizeup of the blockbuster buy-in made last week when nationally prestigious Leonard Green & Partners positioned itself to become majority stockholder.
Going private in anticipation of national healthcare reform —large patient populations covered by cheaper insurance plans — Prospect Medical Holdings Inc., parent company of Brotman, swung a $205 million deal.
The Business Journal, which broke the story, said that more than six law firms are contacting minority shareholders and others to see if they are being shorted in the groundshaking agreement. Unlikely, the Journal was told.
However, this newspaper reached one shareholder who heard from a skeptical law firm, and she was not sure the deal was so clean.
“The question,” said the businesswoman, “is whether Prospect has lowballed the incumbent shareholders in the minority.
“It is not routine to have so many law firms investigating because — I suspect — they have reason to believe it is a lowball deal.
“The motivation behind the lawyers’ suspicion is that because Prospect has an unusual situation of low liquidity. The insiders have a majority of stock, and (lawyers) think they all may have agreed to a lower price.”
The businesswoman sought to explain the advantage of such a move.
“Let’s say you have stock in Prospect and you are an insider,” she said. “They say to you, ‘Look, we’ll let it go at $8.50 per share. You can argue that $9 would be better, but we need you to play ball with us. If you will vote in our favor, we will take care of you later.’
“If you are a company person,” she said, “you will fold and agree to this arrangement.”
Regarding stock prices, the Business Journal quoted Douglas Dieter of Imperial Capital’s Century City office as saying that Prospect has been trading at between $6 and $7 since early this year.
The Business Journal said that shareholders will be paid $8.50 a share, a 39 percent premium on Prospect’s closing price the day before the Aug. 16 the deal was announced. Insiders, it said, have committed their 10.4 million shares, 50 percent of the outstanding shares, in support of the agreement. Forty percent are to be exchanged for cash, the balance for stock in Leonard Green, which holds major investments in numerous chain stores.
Brotman is one of five hospitals run by Prospect.
The Journal said Prospect has until Sept. 25 to seek competing acquisition proposals.
Imperial Capital told this newspaper this morning that Mr. Dieter was out of the office for two days, but earlier he had told Deborah Crowe of the Business Journal that Prospect fared well. “From a market basis, they were offered a premium to what the market has allowed them to trade, and I don’t know how you can dispute that.”
