Street Scan: Gores Group Jumps In with HealthSouth Buy

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The Gores Group, LLC, came out of left field to snap up HealthSouth Corporation’s entire portfolio of 54 imaging centers with a $47.5 million offer. A private equity firm with holdings in telecommunications, business services, and manufacturing, Gores’ HealthSouth acquisition represents a new platform for the company, soon to be one of the industry’s biggest players. The transaction is anticipated to be complete by the end of June or early in the third quarter of 2007, and is subject to customary closing conditions, including regulatory approval. With considerable capital behind it, Gores is likely to be a more formidable competitor that HealthSouth.

“We are opportunistic buyers here,” said Ryan Wald, managing director, The Gores Group, Los Angeles, Calif, told ImagingBiz.com. “We have focused historically on corporate carve-outs. We like businesses where we can add some operational value. We have an operations team that isn’t necessarily looking to replace existing management, but they are ex-CEOs, CFOs, with different operational expertise across the board who can help mentor a management team and help turn it around and hopefully have the business performing better than it was within HealthSouth, in this case.” In fact, the Gores Group selected its new CEO, Diane Munson, from among HealthSouth’s executive ranks, and expects the headquarters to remain in Birmingham, Ala.

While the company’s first task will be to replace aging technology and build a team, Wald suggests that Gores will seek opportunities to grow. “We will first be investing in the existing facilities and making sure our equipment and our technology is up to date and continue to add and buy the latest and greatest equipment out there, but then we’ll start looking for other facilities in what we determine to be our core markets.

“We also like some of the industry dynamics,” he continued. “There will be a lot of opportunities to add to it and one of the things we always try to do is use our capital to support rollups and consolidations within the industry. So, we may very well be trying to add on to this division once we feel it’s stabilized and ready to do that.”

When asked if the DRA cuts to imaging reimbursement gave the suitor pause, Wald replied: “They are frightening. We think that we factored into our operating plan the effects of that.”

In fact, Wald reports that the company has a positive outlook for the future of the imaging center business. “I’m certainly not an industry expert, but we are seeing scan volumes continue to increase, so we have a positive outlook on it and that is why we are buying into the space,” he said.

Wald declined to divulge just how deep the pockets are of this newest competitor in the imaging center space, not wanting to advise his competitors the specifics of the Gores Group plan. But he did add, “Hopefully we’ll be spending more.”

According to a press release from Birmingham, Ala-based HealthSouth, 80% of the centers are multi-modality facilities offering a combination of outpatient diagnostic imaging services, including MRI, CT, X-ray, ultrasound, mammography, fluoroscopy, and nuclear medicine services. The centers are located in 19 states and the District of Columbia. Deutsche Bank Securities served as HealthSouth's financial advisor for this transaction.