Emergency Medical Said to Be Near $3.1 Billion Sale to Clayton Dubilier

Emergency Medical Services Corp. is near an agreement to be acquired by private-equity firm Clayton Dubilier & Rice LLC in a leveraged buyout valued at about $3.1 billion, three people familiar with the matter said.

Directors of the Greenwood Village, Colorado-based ambulance company planned to vote on the offer yesterday and announce it today, said the people, who declined to be identified because the matter is private. Talks may still break down.

EMS, the largest U.S. operator of ambulance services and provider of emergency-room doctors, said Dec. 14 it was looking at strategic alternatives. Directors had pushed for higher bids from Clayton Dubilier and runner-up Bain Capital LLC. The Deal first reported the winning bid yesterday.

Clayton Dubilier may pay about $70 a share, the people said. That would be less than the company’s $70.66 closing price on Feb. 11 on the New York Stock Exchange. The final sales price may be $3 billion to $3.1 billion, one of the people said.

Deborah Hileman, a spokeswoman for EMS, didn’t return calls seeking comment late yesterday. A spokesperson for Clayton Dubilier also didn’t respond to calls.

Goldman Sachs Group Inc. and Bank of America Corp. are running the sales process, the people said. Clayton Dubilier isn’t working with another private-equity fund, the people said.

‘Fair Price’

“This is a very fair price for this company,” said Arthur Henderson, an analyst with Jeffries & Co. in Nashville, in a telephone interview yesterday. “There wasn’t a strategic buyer that was big enough to buy EMS, and for private equity buying for the cash flow this price makes sense.”

The U.S. health-care overhaul passed last year, designed to give millions of uninsured Americans taxpayer-subsidized medical coverage, made EMS an attractive takeout target, Henderson said. The company’s ambulance and emergency staffing and management units may both profit from the overhaul, he said.

“There’s money to be made in making all of this more efficient and that would be appealing to any private equity buyer,” Henderson said. “I expect to see a lot more consolidation in health services, nursing homes, and long-term care. The number of competitors is going to get smaller and the ones that survive are going to get bigger.”

Private-equity firms had announced 397 pending or completed acquisitions of U.S. health products and services companies in the past five years, with an average size of $449.4 million and a typical premium of 30 percent, according to data compiled by Bloomberg as of Feb. 10. The biggest was the 2006 leveraged buyout of hospital operator HCA Inc. for about $33 billion, led by firms including New York-based KKR & Co. and Bain, which is based in Boston.

‘Deep Pockets’

Private equity firms, which raised at $50 billion to $80 billion in health industry deals from 2006 to 2010, “have very deep pockets right now and will be looking to do more deals in this space,” said Dawn Brock, an analyst with Kaufman Bros. in New York, in a telephone interview yesterday.

“Unless you believe there will be a wholesale repeal of health reform, which I don’t think anybody does, there will be some scenario where there are more covered bodies and more paying customers than you have right now,” Brock said.

EMS’s ambulance unit had 2009 revenue of $1.34 billion and its emergency physician business reported 2009 sales of $1.23 billion. EMS may report 2010 revenue of $2.86 billion, according to the average estimate of 10 analysts surveyed by Bloomberg.

EMS shares fell 3 cents to $70.66 on Feb. 11 and have gained 29 percent in the past year. The shares rose the most in five years on Dec. 14 after the company said it was “reviewing various strategic alternatives.”

To contact the reporters on this story: Jeffrey McCracken in New York at jmccracken3@bloomberg.net; Lisa Rapaport in New York at Lrapaport1@bloomberg.net.

To contact the editors responsible for this story: Reg Gale in New York at rgale5@bloomberg.net Jennifer Sondag in New York at jsondag@bloomberg.net

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