The Mednax [NYSE:MD] sale process is struggling as financial sponsors evaluate a buyout of the Sunrise, Florida-based healthcare services provider, several sources briefed on the situation said.
Some of the sponsors who conducted detailed due diligence and took management meetings have put their pencils down, four of the sources briefed on the situation said. At least one financial sponsor is still around the process, two of the sources said.
The company did not respond to a request for comment.
On Thursday afternoon, Mednax shares traded at just under USD 51 to value the company at around 11.3x 2017 EBITDA on an enterprise value basis. The stock dropped over 3% on Thursday following comments by investor Jim Chanos to CNBC that he is short Mednax and peer Envision Healthcare [NYSE:EVHC], which is also reviewing strategic alternatives.
Mednax provides outsourced medical and surgical services to hospitals in 50 states and Puerto Rico. It is scheduled to announce its 1Q18 earnings on 7 May. If the company starts to deliver on its earnings projections, private equity suitors may return to the table, one of the sources said.
Envision and Mednax have faced similar headwinds as they look to address large debt loads from past acquisitions and changes to how health insurers reimburse providers. Chanos claimed on CNBC that Envision and Mednax rely on “deception or aggressive use of reimbursement.”
Activist investor Elliott Management disclosed a 7% stake in Mednax in November and said that it would discuss several options to boost value for shareholders, including a sale of the company.
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By Bhavna Kaul, Anastasia Donde, Jay Antenen and Dane Hamilton