Medical Facilities Corporation (TSX: DR), a Canada-listed and headquartered company with all of its operations located in the U.S., announced the divestiture of Black Hills Surgical Hospital, one its large surgical hospital facilities. The acquirer is Sanford Health, one of the largest non-profit health systems in the United States. Sanford currently owns approximately 45 hospitals, primarily located in rural communities, throughout nine states. The acquisition marks its initial foray into the Rapid City healthcare market. According to the press release:
The proposed transaction is structured as a merger in which Sanford would acquire 100% of the equity securities of BHSH for a total purchase price of $194 million, subject to customary purchase price adjustments (the "Transaction"). The Transaction is expected to yield gross proceeds of approximately $105.2 million for MFC's 54.22% ownership share of BHSH. MFC's minority partner in BHSH, Black Hills Surgical Physicians, LLC, is also participating in the Transaction.
Impact of New Competition in 2019
The facility and MFC's other Idaho surgical hospital in Sioux Falls are interesting case studies in new competition within rural healthcare markets. MFC's stock price fell precipitously (~75%) in 2019 due to incoming competition from a new Avero Health in Sioux Falls and Regional Health (now Monument Health) in Rapid City / Black Hills. However, the new competitors have struggled to wrestle market share away from MFC's orthopedist partners, with each facility growing net patient revenue at a 4%-5% compound annual growth rate since 2019.
Surgical Hospital EBITDA Multiples
The transaction implies multiples of approximately 1.8x revenue and 9x EBITDA, which is line with other surgical hospital transactions of similar size.
Other Specialty Hospital M&A Deals
Read Scope Research's take on other specialty hospital M&A transactions:
About Scope Research
The Scope Research Healthcare M&A Valuation Database currently has financial details for 63 specialty hospital deals going back to 2010, 53 of which include reported EBITDA multiples. The specialty hospital data can be purchased individually, while our affordable annual subscriptions provide access to all of our healthcare M&A databases and segments, updated continuously.
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