Foothill Ranch-based nursing home operator SHG Holding Solutions Inc. is moving ahead with plans to go public.
SHG, which does business as Skilled Healthcare Group, said it expects to complete its initial public offering after swapping $200 million in debt, according to a filing with the Securities and Exchange Commission.
The company didn’t outline a timetable.
SHG hopes to raise $113 million from its stock offering, based on a share price of $15. It’s set to sell some 16.7 million shares. SHG is looking to list on the New York Stock Exchange under the ticker “SKH.”
What SHG’s market value will be is unclear.
Nursing home operators typically see discounted market values because of heavy debt.
Irvine’s Sun Healthcare Group Inc., a larger nursing home operator, counts yearly sales of $1 billion and is profitable with a recent market value of about $600 million.
Operations
SHG runs 77 nursing and assisted living homes with 8,917 licensed beds in California and four other states.
Local facilities include Alta Care Center in Garden Grove, Carehouse Healthcare Center in Santa Ana and St. Elizabeth Healthcare and Rehabilitation Center in Fullerton.
Toronto investor Onex Corp. bought Skilled Healthcare for about $645 million in 2005.
After the offering, Onex is set to own about 78% of SHG.
SHG’s proposed offering is one of the larger within Orange County’s healthcare sector. So far this year, medical device makers have dominated healthcare offerings (see story, page 1).
Among device makers, Masimo Corp., an Irvine maker of pulse and oxygen monitoring devices, recently filed to sell up to $150 million of its common stock. Irvine-based Devax Inc., which makes stents to treat vessel diseases, filed its offering plans earlier this month.
In March, SenoRx Inc. of Aliso Viejo went public, raising $45 million.
SHG is hoping investors will warm to it amid a comeback for nursing homes.
A decade ago, the sector went through turmoil. At one time, five of the top seven nursing home operators sought refuge in bankruptcy court.
The Balanced Budget Act of 1997, which dealt nursing home operators heavy cuts in federal reimbursements, brought on much of the pain.
Sun Healthcare, one of the sector’s larger players at the time, underwent bankruptcy reorganization and what Chief Executive Richard Matros called “a major restructuring.”
The company just completed its buy of Boston-based Harborside Healthcare, giving it 216 facilities and nearly 25,000 licensed beds.
Profitable
SHG is making money,it posted a net profit of $17.3 million on revenue of $532 million last year. In the first quarter, it earned $4.7 million on revenue of $144.7 million.
In its registration statement, SHG said it plans to use proceeds of the offering to pay down debt.
As of March 31, SHG’s debt was $515 million.
Like Sun, SHG has gone after more government business. According to its filing, Medicare accounted for 38% of its revenue in the first quarter.
SHG, which has 6,980 workers, is led by Boyd Hendrickson, its chief executive who’s been with the company since its days as Fountain View Inc.
Fountain View filed for bankruptcy in 2001 in the wake of reimbursement cuts and a $6.1 million jury verdict in a negligence case that it eventually settled for $1.1 million.
The company emerged from bankruptcy in 2003 and changed its name to Skilled Healthcare. Heritage Partners Inc., a Boston investor that owned half of the company prior to the bankruptcy, ended up with 80% of the reworked company.
Heritage hired Credit Suisse First Boston in 2005 to look at options for Skilled Healthcare. An initial public offering was considered prior to the majority sale to Onex.
