Select Medical to Spinoff Concentra this month

After announcing plans to spinoff Concentra Group Holdings earlier this year, Select Medical Holdings Corporation is set to complete its separation from Concentra November 25.

How the change impacts investors remains to be seen.

Select Medical is a Mechanicsburg-based health care company with a focus on critical illness recovery. Select’s special stock distribution to complete the business separation creates two independent publically traded companies, according to the company.

Nasdaq.com defines a corporate spinoff as a divestment of one or many divisions of a company.

“Spin-offs are a way to ‘enhance’ shareholder value by allowing each group to focus on what they do best. These are [business] structural moves that sometimes work and sometimes don’t (i.e. stock price does not perform),” said Patrick J. Zoro, a teaching assistant professor and program manager at Lehigh University’s department of finance.

He said spinoffs typically allow for improved performance when each company is involved in a different aspect or business sector.

“In 2012 McGraw Hill spun off into what are now S&P (the rating agency) and McGraw Hill [book] publications. Such spin-offs work best when each company has a distinct business,” Zoro explained.

He said the 2012 Kraft Foods Inc. spinoff, which created Kraft Foods Group and Mondelēz International, Inc., hit investors negatively.

“Here you are splitting one food company into two food companies, and it did not do well for investors,” he said.

“Shares in the new spinoff are allocated to existing shareholders of the parent company based on a predetermined exchange rate,” the Nasdaq.com report said.

Shareholders typically receive “pro rata” shares in the new company – or the number of shares owned by the parent company would be the same number of shares investors would receive in the spinoff company, Nasdaq.com said.

“Select Medical estimates that Select Medical’s stockholders will receive approximately 0.806971 shares of Concentra’s common stock for every share of Select Medical’s common stock held as of the close of business on the Record Date [Nov. 18, 2024]. The final distribution ratio will be determined based on the number of shares of Select Medical’s common stock outstanding on the Record Date,” Select said in the release.

Select operates sites in central Pennsylvania and the Lehigh Valley. As of Nov. 1, The organizations reported net worth according to Stock Analysis.com was about $5.08 billion. Select has about 54,000 employees working across 46 states and in Washington, D.C.

“Select operated 106 critical illness recovery hospitals in 29 states, 34 rehabilitation hospitals in 13 states, 1,925 outpatient rehabilitation clinics in 39 states and the District of Columbia, and 549 occupational health centers in 41 states, as of September 30, 2024,” PR Newswire.com reported.

Concentra offers occupational health, physical therapy, exams, tests and screenings, the Concentra website said. Across the region Concentra has facilities in Allentown, Bethlehem, Harrisburg, York and Carlisle.

Concentra’s projected revenue for 2024 according to Tip Ranks Portfolio.com is about $1.9 billion. It has more than 11,000 employees and is a global leader in occupational health in the U.S., according to LeadiQ.com.

In 2015 Select cleared the Federal Trade Commission Hart-Scott-Rodino Antitrust Improvements Act of 1976 and its requirements to acquire Concentra.

In March, 2015, Select announced it would assume Concentra’s $1.055 billion (with sale adjustments) for its outstanding equity securities.