Houston-based private equity firm Welsh, Carson, Anderson & Stowe announced an agreement to buy up all outstanding stock of cancer care provider US Oncology in a going-private transaction valued at approximately $1.7 billion (€1.4 billion).
According to the statement, Welsh Carson, which already owns about 14.5 percent of the company, will merge US Oncology with its platform company Oiler Acquisition. Under the terms of agreement, Welsh Carson will pay $15.05 per share in cash, and the transaction will include consideration for outstanding stock options and the assumption of certain debt obligations. US Oncology’s senior management will continue in their positions at the company.
In the statement, US Oncology chairman and chief executive officer Dale Ross said the going-private deal will not only return value to stockholders, but also “provides an exciting opportunity for US Oncology, its management and physician constituents going forward in dealing with new Medicare regulations that will affect US Oncology’s business.”
In January, the recently passed Medicare Modernization Act went into effect, reducing funding for community caner care, therapies and services by $11.5 billion over the next decade. According to a source familiar with the deal, the privatisation will allow US Oncology’s management team to focus more on the operations side of the business in order to prepare for even deeper cuts in the Medicare budgets beginning in 2005.
The transaction is expected to be completed in the second quarter of 2004 pursuant to the completion of necessary federal government filings.
Welsh Carson was a founding investor of US Oncology in 1992. The company provides cancer-car services to affiliated practices and more than 875 doctors. The company also operates 78 cancer centers and cares for approximately 15% of the country’s new cancer cases each year. The company had revenues of $1.97 billion in 2003– up 19% from 2002.
Welsh Carson has raised more than $11 billion in capital since its inception in 1979. The firm currently invests out of its $3.8 billion Fund IX.