MedCath completes sale of TexSan Heart Hospital to Methodist Healthcare System

Jan 3 2011

MedCath Corporation (Nasdaq: MDTH) announced today the completion of the sale of substantially all the assets of TexSan Heart Hospital, owned by MedCath and its physician investors, to Methodist Healthcare System of San Antonio. The transaction, which was announced in November, and was subject to customary closing conditions and regulatory requirements, was completed effective December 31, 2010.

This is MedCath's fifth completed transaction since announcing in March it had formed a Strategic Options Committee to consider the sale either of the entire company or its assets. Since October, MedCath has announced the completion of sales involving the following hospitals: Arizona Heart Hospital, Avera Heart Hospital of South Dakota and Heart Hospital of Austin. In addition, MedCath's Partners division sold its minority interest it held in Southwest Arizona Heart and Vascular, LLC in November.

Since opening in 2004, the TexSan Heart Hospital repeatedly distinguished itself with the quality care provided at the hospital. In 2009, the hospital received an Excellence Award from HealthGrades, the leading independent health care ratings organization. It was cited for being among the leading hospitals in America by Consumers' Checkbook survey, according to the May/June 2009 issue of AARP The Magazine. In September, it became one of approximately 400 facilities nationwide to be recognized by Blue Cross and Blue Shield as a Blue Distinction Center for Cardiac Care®, due to its commitment to quality care.  And earlier this year, it was named an American Society for Metabolic and Bariatric Surgery (ASMBS) Bariatric Surgery Center of Excellence®.

"MedCath is thankful to the local physicians who had the vision to bring world-class heart care to San Antonio and southwest Texas, and will always be proud of how it helped make that vision a reality," said O. Edwin French, MedCath's president and CEO. "Methodist Healthcare System brings together many of San Antonio's most respected health care facilities. We know the new owners will continue to serve the community well, and we wish them continued success."

Under terms of the transaction, MedCath sold substantially all of the assets of TexSan Heart Hospital for a purchase price equal to approximately $78.5 million, plus retention of working capital. MedCath anticipates it will receive approximately $58.0 million in cash from the transaction after payment of retained liabilities, closing costs, taxes, liquidation of retained working capital and acquisition of the partnership's minority investors' ownership in accordance with the terms of an agreement entered into between MedCath and the minority partners of TexSan.  That agreement granted MedCath the right and authority to unilaterally enter into and complete the transaction in exchange for MedCath's agreement to purchase the partnership interests of its minority partners for a purchase price equal to the net amount of the minority partners' unreturned capital contributions adjusted upward to the extent such partners' proportionate share of net proceeds from the sale exceed their unreturned capital. Beginning with its first quarter of fiscal 2011, which ended December 31, 2010, MedCath will account for TexSan Heart Hospital as a discontinued operation for current and prior reporting periods. Navigant Capital Advisors, who was retained by MedCath to provide advisory services relative to assessment of MedCath's strategic alternatives, provided advisory services on the transaction.

The approximately $58.0 million in cash that MedCath anticipates receiving from this sale does not reflect unknown liabilities, if any, that relate to the pre-closing period that remain the responsibility of the limited partnership that owned TexSan Heart Hospital.