Prospect Medical Closes Acquisition of ProMed Healthcare for $48.0 million

Prospect Medical Holdings, Inc. (AMEX: PZZ), which manages the medical care of HMO enrollees in Southern California, today announced that it has completed its previously announced acquisition of ProMed Health Care for cash consideration of $41.0 million and shares of Prospect common stock valued at approximately $7.0 million.
 
Bank of America provided $53.0 million of financing to Prospect for the acquisition, which was comprised of a $48.0 million term loan, with an initial interest rate of prime plus 0.75%, and a $5.0 million revolving credit facility, with an initial interest rate of prime plus 0.25%. The term loan was used to fund the cash portion of the ProMed acquisition and to repay the remaining approximately $7.5 million balance on Prospect’s existing credit facility with GMAC Health Capital.

As a result of the acquisition, Prospect is now the sixth-largest IPA in the state of California. Prospect now serves approximately 250,000 HMO enrollees, nearly 24,000 of whom are Seniors, through a network of 13 affiliated IPAs comprised of approximately 9,000 primary care and specialist physicians. The acquisition is expected to be immediately accretive to earnings. For its fiscal year ended September 30, 2006, ProMed generated revenues of approximately $90.0 million and operating income of approximately $9.0 million.

Dr. Jeereddi Prasad, M.D., ProMed’s Chairman, has joined Prospect’s Board of Directors, increasing Board membership to seven. Dr. Prasad and other members of ProMed’s management have also entered into multi-year employment agreements with Prospect.

Dr. Jack Terner, M.D., Chairman and Chief Executive Officer of Prospect, commented, "We are optimistic about the benefits that this acquisition will produce for patients, payors, and physicians in our operating territories. We are also confident that we can leverage this business platform to drive further efficiencies, future growth, and enhanced shareholder value."

Dr. Prasad stated, "We believe that this combination will allow Prospect and ProMed to advance our shared goal of providing the highest standard of care to HMO enrollees in Southern California."