- Frazier Healthcare Partners to acquire a majority interest in Matrix Medical Network; Providence Service Corporation
will maintain a significant interest and have representatives on Matrix’s Board of Director
- Transaction values Matrix at $537.5 million
- Providence to receive gross cash proceeds of approximately $418 million before transaction costs, taxes, and
customary post-closing adjustments
STAMFORD, Conn., Aug. 29, 2016 (GLOBE NEWSWIRE) -- The Providence Service Corporation (“Providence”)
(Nasdaq:PRSC) today announced it has signed a definitive subscription agreement with an affiliate of Frazier Healthcare Partners
(“Frazier”), a leading private equity firm based in Seattle, pursuant to which Frazier will own a 60% equity interest in Matrix
Medical Network (“Matrix”), 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.
“This partnership will allow us to accelerate our growth strategy into a diversified healthcare services company
by leveraging our proven operational platform as the foundation,” said Walt Cooper, CEO of Matrix. “We look forward to
partnering with one of the preeminent healthcare investors by utilizing their strategic relationships and broad expertise to bring
care to more markets and more populations.”
“We are excited to partner with Providence to help Matrix expand its core offerings into adjacent markets and
provide innovative additional services to its customers' members,” said Ben Magnano, General Partner at Frazier. “This
partnership is another successful example of Frazier's operating partner model whereby we work with experienced executives to
identify and invest in growth areas within healthcare. Brett Moraski, who is a long-tenured managed care executive and
Frazier Operating Partner, helped create the opportunity for investment into Matrix in partnership with Providence. We look
forward to working with the Matrix team and Brett to continue driving the future growth of the business.”
According to James Lindstrom, CEO of Providence, “After recently completing its two millionth in-home health
assessment visit, we are creating this partnership with Frazier to accelerate Matrix’s growth opportunities. Partnering with
Frazier is an example of how Providence seeks to work with leaders in industry domains, particularly where those partners with deep
industry insight, when combined with our long-term investment perspective, can provide advantages for our clients, colleagues and
shareholders. For Providence, the transaction represents a validation of the investment to date and the liquidity provides
further opportunity for disciplined capital deployment.”
Strategic Partnership Overview
The strategic partnership with Frazier is expected to generate substantial strategic and operational benefits,
such as:
- Positioning Matrix to accelerate growth in its chronic care management and assessment offerings;
- Providing Matrix with access to Frazier’s network and domain expertise in payor services, which can provide additional
acquisition and investment opportunities for both Providence and Frazier; and
- Allowing Providence to benefit from Matrix’s enhanced earnings growth profile through its ongoing equity ownership.
The transaction, which has been approved by the Providence Board of Directors, values Matrix at $537.5
million. Providence 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. Further details can be found in the 8-K to be filed on or about August 31, 2016.
Matrix Background
Acquired by Providence in October 2014 for approximately $393 million, Matrix has strengthened its strategic
value through a variety of initiatives under the Matrix and Providence leadership teams. In an effort to build a foundation
for future growth, Matrix has since launched an in-home chronic care management program and expanded its in-home assessments
offerings into adjacent markets. In 2015, Matrix generated $217.4 million of revenue and operating income of $22.1 million,
which included $29.5 million of depreciation and amortization.
Additional Transaction Considerations
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.
TripleTree served as financial advisor to Providence. Debevoise & Plimpton LLP served as Providence’s primary legal
counsel. Goodwin & Proctor LLP served as Frazier’s primary legal counsel.
About Providence
The Providence Service Corporation is a holding company whose subsidiaries provide critical healthcare and
workforce development services, comprised of non-emergency transportation services, workforce development services, legal offender
rehabilitation services, health assessment services, and care management services in the United States and abroad. For more
information, please visit www.prscholdings.com.
About Frazier Healthcare Partners
Founded in 1991, Frazier Healthcare Partners is a leading provider of growth capital to healthcare companies.
The firm has over $2.9 billion in committed capital under management and has made investments in over 170 healthcare companies with
investment types ranging from company creation and venture capital to growth buyouts and leveraged recapitalizations. Frazier’s
experienced team takes an active approach to helping build portfolio companies, leveraging the team’s deep domain expertise and
expansive network of healthcare executives, advisors and industry thought leaders. The firm’s Growth Buyout team invests in
profitable companies focusing on healthcare services, pharmaceutical services, medical products, and related sectors. The firm’s
Life Sciences team invests in therapeutics and related areas that are addressing unmet medical needs through innovation. Frazier
has offices in Seattle, Washington and Menlo Park, California, and invests broadly across the United States, Canada, and Europe.
Additional information about Frazier is available through its website, www.frazierhealthcare.com.
Forward-Looking Statements
This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation
Reform Act of 1995. Words such as “believe,” “demonstrate,” “expect,” “estimate,” “forecast,” “anticipate,” “should” and “likely”
and similar expressions identify forward-looking statements. In addition, statements that are not historical should also be
considered forward-looking statements. Readers are cautioned not to place undue reliance on those forward-looking statements, which
speak only as of the date the statement was made. Such forward-looking statements are based on current expectations and assumptions
of Providence’s management that involve a number of known and unknown risks, uncertainties and other factors which may cause actual
events to be materially different from those expressed or implied by such forward-looking statements. These factors include, but
are not limited to, the timing of the closing of, and risks associated with the ability to consummate, the transaction between
Providence and Frazier, the ability of Matrix to realize the anticipated benefits of the partnership between Providence and
Frazier, the potential impact of the announcement of the transaction or consummation of the transaction on relationships, including
with employees, customers and competitors and other risks detailed in Providence’s filings with the Securities and Exchange
Commission, including its Annual Report on Form 10-K for the fiscal year ended December 31, 2015 and subsequent filings.
Providence is under no obligation to (and expressly disclaims any such obligation to) update any of the information in this
press release if any forward-looking statement later turns out to be inaccurate whether as a result of new information, future
events or otherwise.
Investor Relations Contact Chris Brigleb – VP of Finance (203) 816-6589
