Mechanicsburg-based Select Medical Holdings Corp. is preparing to spin off its occupational health services division, which does business as Concentra.
- Select Medical’s board approved the spin-off this week and expects the deal to close in late 2024.
- Select Medical shareholders would receive stock in Concentra in amounts yet to be determined but in a transaction that is expected to be tax free.
- If the deal goes through, Concentra would emerge as a stand-alone, publicly traded company, according to a press release.
- “The board and management team regularly evaluate strategic alternatives to maximize stockholder value, while supporting our overall mission — providing an exceptional patient care experience that promotes healing and recovery in a compassionate environment,” Select Medical chairman and co-founder Robert Ortenzio said in a statement. “We are pursuing the potential separation of Concentra with the objective of enhancing success of each business by creating two companies that will be leaders in their respective markets.”
The business: As of Sept. 30, Concentra operated 539 stand-alone occupational health centers and 135 onsite clinics at employer worksites in 41 states. It employs more than 11,000 people.
- Based in Addison, Texas, the unit accounts for more than a quarter of Select Medical’s revenue, according to regulatory filings.
- For the first nine months of 2023, Concentra had revenue of nearly $1.4 billion, compared to $5 billion for the company as a whole.
- It is also one of Select Medical’s more profitable units. Concentra had income from operations of $215.2 million for the first nine months of 2023, compared to $316.4 million for the company as a whole.
- The company’s other units are critical illness recovery hospitals, rehab hospitals and outpatient rehab services.
The background: Select Medical has owned 100% of Concentra since late 2021, when the company paid $625.6 million for a 20.23% stake that had been held by private equity firm Welsh Carson Anderson & Stowe and California health system Dignity Health.
- Select Medical partnered with Welsh Carson to buy Concentra in 2015 for roughly $1.05 billion.
- Dignity Health joined the venture in 2018.
- Concentra had been owned by health insurer Humana, which paid $790 million for the firm in 2010.
The stock: Shares in Select Medical rose on news of the potential spinoff.
- The company’s stock had been trading at around $24 per share to start the year but has since jumped to above $26 per share.
