MONTREAL--(BUSINESS WIRE)--Converium Capital Inc. (“Converium”), one of the largest shareholders of Medical Facilities Corporation (TSE: DR) (“Medical Facilities” or the “Company”), today announced it sent the below letter to the Medical Facilities Board of Directors (the “Board”) to congratulate the Company on its recent sale of Black Hills Surgical Hospital.
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November 20, 2024
Board of Directors
Medical Facilities Corporation
4576 Yonge Street, Suite 701
Toronto, ON M2N 6N4
Dear Members of the Board,
As one of the largest shareholders of Medical Facilities Corporation (“Medical Facilities” or the “Company”), Converium Capital Inc. (“Converium” or “we”) congratulates the Company on its recent sale of Black Hills Surgical Hospital (“Black Hills”). In particular, we want to recognize the efforts and unprecedented results achieved by the executive team over the last two years. Since the Board of Directors (the “Board”) was reconstituted and Jason Redman assumed the role of President and CEO in 2022, the Company has enhanced its relationship with its hospital and physician partners, improved its overhead and free cash flow, optimized its portfolio of surgical centers and hospitals, increased its dividend, and transformed its balance sheet. We are especially pleased that over the last three years the Company eliminated its corporate level net debt and repurchased 25% of its outstanding shares.
These significant achievements have led to a total shareholder return of 90% over the last twelve months, substantially outperforming the S&P 500 and various U.S. healthcare indices. We hope that the Board will both compensate the Company’s executives appropriately for the outstanding sale of Black Hills and incentivize the executive team to pursue the sale of the Company’s other hospitals. We believe the Black Hills sale demonstrates that the path most likely to maximize shareholder value is the sale of the Company’s remaining hospitals.
While Medical Facilities’ share price has increased significantly over the last year, we believe that the shares remain meaningfully undervalued at just over 6x our estimate of the Company’s EBITDA, after deducting the physicians’ non-controlling interest. By contrast, our estimated valuation for the Black Hills sale is more than 9x EBITDA, after deducting the non-controlling interest. We therefore encourage the Company to continue aggressively repurchasing its shares. In our view, the Company’s robust free cash flow, continued share buybacks and additional hospital sales will likely result in a meaningfully higher share price over time, benefitting all shareholders.
We remain enthusiastic and supportive shareholders of Medical Facilities and look forward to its continued success.
Sincerely,
Michael Rapps
Managing Partner
Converium Capital
About Converium Capital
Converium Capital is a multi-strategy opportunistic investment firm. Converium aims to deliver positive and uncorrelated returns regardless of macroeconomic conditions by investing in distressed and event-driven opportunities globally and across the capital structure.
Disclaimer
The views expressed in this announcement and the letter to which it refers represent the opinions of Converium Capital Inc. (“Converium”), which may change at any time and are based on publicly available information with respect to Medical Facilities Corporation (the “Company”). Converium disclaims any obligation to update the data, information or opinions contained herein. Financial information used herein has been derived or obtained from publicly-available sources, including filings made by the Company or by other companies that Converium considers comparable, and from other third-party sources.
Although data and information contained herein have been obtained from sources believed to be reliable, Converium does not guarantee their accuracy, completeness or fairness. Converium has relied upon and assumed, without independent verification, the accuracy and completeness of all data and information available from public sources. No warranty is made that any data or information contained herein is accurate, whether derived or obtained from filings made with a regulator or from any third party.
There is no assurance or guarantee with respect to the prices at which any securities of the Company will trade, and such securities may not trade at prices that may be implied herein. Clients of Converium hold positions in the securities of the Company. Converium may sell all or a portion of its clients’ exposure to the Company’s securities or may cause its clients to buy additional securities of the Company at any time (whether in open market or privately negotiated transactions, or otherwise). Converium reserves the right to take any action with respect to its clients’ investment in the Company as it deems appropriate, including communicating with the board of directors or management of the Company, or with other investors. Neither these materials nor anything contained herein is intended to be, nor should it be construed or used as, investment, tax, legal or financial advice, an opinion about the appropriateness of any security or investment, or an offer, or the solicitation of an offer, to buy or sell any security or investment.