Frazier Healthcare To Buy Majority Interest In Matrix Medical In $537.5 Mln Deal

(RTTNews) - The Providence Service Corp. (PRSC) announced it has signed a definitive subscription agreement with an affiliate of Frazier Healthcare Partners , a private equity firm based in Seattle, by which Frazier will own a 60% equity interest in Matrix Medical Network, which values Matrix at approximately $537.5 million.

Following closing of the transaction, Providence will retain a 40% equity interest in Matrix and have representatives on Matrix's Board of Directors.

The transaction, which has been approved by the Providence Service Board of Directors, values Matrix at $537.5 million. Providence Service will receive gross cash proceeds from Matrix of approximately $418 million before transaction fees, taxes, and customary post-closing adjustments while also retaining a 40% equity interest in Matrix. The cash proceeds to Providence are comprised of a new term loan fully underwritten by SunTrust Robinson Humphrey and Frazier's subscription for a 60% equity interest.

Providence intends to use a portion of the cash proceeds to repay in full its term loan and swingline credit facilities. Upon the closing of the transaction, Providence expects to have approximately $194 million of undrawn capacity on its swingline credit facilities. Based upon Providence's anticipated outstanding debt immediately after closing of the transaction, Providence expects its annual interest expense to decrease to approximately $0.5 million per year and to be comprised primarily of undrawn revolving commitment fees.

Providence expects to recognize a pre-tax gain as a result of the transaction in the range of $125 million to $150 million in the fourth quarter of 2016. Upon closing, Providence expects to report its 40% equity interest in Matrix as an equity investment.

Subject to additional management evaluation of market and business conditions, share price and other factors and evaluation and approval by Providence's Board of Directors, the remaining net proceeds from the transaction may be used by Providence for acquisitions, investments in the long-term development of the Company's other businesses and the return of capital to stockholders through a share buyback program, among other uses.

The transaction is subject to satisfaction of customary closing conditions and is expected to close in the fourth quarter of 2016.