Astrana Health ($ASTH) announced on Friday that it has reached an agreement to acquire specific businesses and assets of Prospect Health System for $745 million, aiming to enhance its care provider network. Prospect's extensive network includes nearly 3,000 primary care providers and 10,000 specialists throughout Southern California, Texas, Arizona, and Rhode Island.
This organization aids providers in delivering care to approximately 610,000 members across Medicare Advantage, Medicaid, and commercial services, stated Astrana. The acquisition encompasses Prospect's California-licensed health care service plan, medical groups located in California, Texas, Arizona, and Rhode Island, a management service organization, pharmacy, and the 177-bed Alta Newport Hospital. Brandon Sim, Astrana’s Chief Executive, commented, "Prospect's established presence in key markets also opens new opportunities for Astrana, particularly in geographically adjacent Orange County, California." To finance the deal, the health care company plans to utilize its available cash along with a $1.1 billion senior secured bridge commitment.
Astrana has also expressed intentions to make "significant" investments in Prospect and its infrastructure. Jim Brown, the CEO of Prospect, remarked, "We believe the strong cultural alignment, cohesive missions, and clear financial and operational synergies between our companies make Astrana the ideal partner for us." Astrana projects that Prospect will generate around $1.2 billion in revenue, with adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) estimated at $81 million for the 12 months ending December 31.
The transaction is projected to be finalized in mid-2025, pending regulatory approval. In a separate update, Medical Properties Trust ($MPW) anticipates receiving approximately $200 million from the transaction after fulfilling obligations to the senior creditor of the Prospect managed care platform and other liabilities.
The real estate investment trust expects the majority of this payment to occur in the first half of the upcoming year, with an additional $50 million expected by 2027. Furthermore, Astrana reported a decline in its third-quarter earnings, dropping to $0.33 per share from $0.47 in the previous year, while revenues increased by 37% to $478.7 million.
These figures exceeded the consensus estimate of $0.32 in EPS and revenue of $466 million based on Capital IQ polls. Looking ahead to 2024, the company anticipates EPS to be between $1.06 and $1.19, a reduction from the earlier guidance of $1.12 to $1.36, with revenue projected between $1.95 billion and $2.03 billion compared to the previously expected $1.75 billion to $1.85 billion range.
Wall Street forecasts are for $1.25 billion and $1.89 billion, respectively. In Friday's trading, Astrana shares saw a decline of 15%..