Astrana Health ($ASTH) announced on Friday an agreement to acquire certain businesses and assets of Prospect Health System for $745 million, aimed at expanding its care provider network. Prospect's network includes nearly 3,000 primary care providers and 10,000 specialists across Southern California, Texas, Arizona, and Rhode Island.
The firm is pivotal in facilitating care delivery to approximately 610,000 members through Medicare Advantage, Medicaid, and commercial services, as stated by Astrana. The acquisition encompasses Prospect's California-licensed health care service plan and its medical groups in California, Texas, Arizona, and Rhode Island, in addition to its management service organization, pharmacy, and the 177-bed Alta Newport Hospital. Brandon Sim, Astrana's Chief Executive, shared, "Prospect's established presence in key markets also opens new opportunities for Astrana, particularly in geographically adjacent Orange County, California." To finance this transaction, the health care company plans to utilize cash reserves and a $1.1 billion senior secured bridge commitment.
Astrana aims to make "significant" investments in both Prospect and its infrastructure following the acquisition. 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 anticipates that Prospect will generate around $1.2 billion in revenue, with adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) estimated at $81 million for the 12 months concluding on December 31.
The completion of the deal is projected for mid-2025, pending regulatory approval. In a separate announcement, Medical Properties Trust ($MPW) stated it expects to receive approximately $200 million from the transaction, after addressing obligations to Prospect's managed care platform's senior creditor and other liabilities.
The real estate investment trust anticipates receiving the majority of this payment in the first half of next year, with a further $50 million expected by 2027. On Thursday, Astrana reported a decline in its third-quarter earnings, falling to $0.33 per share from $0.47 a year earlier, while revenue surged 37% to $478.7 million.
This performance exceeded the Capital IQ-polled consensus, which estimated EPS at $0.32 on revenue of $466 million. Looking ahead to 2024, the company projects EPS between $1.06 and $1.19, revised down from the previous estimate of $1.12 to $1.36. Revenue expectations are now set between $1.95 billion and $2.03 billion, compared to earlier predictions of $1.75 billion to $1.85 billion.
Wall Street analysts forecast $1.25 billion and $1.89 billion respectively. Following these announcements, Astrana shares experienced a decline of 15% during Friday’s trading session..