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Take SEM Off the Menu? Executive Chairman Gives Premium Offer

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Key Takeaways

  • SEM received a non-binding take-private proposal offering $16 to $16.20 per share.
  • The bid comes from Executive Chairman Robert A. Ortenzio, signaling interest in private control.
  • The move follows a 63.8% stock drop and a valuation below SEM's five-year median and industry average.

Select Medical Holdings Corporation (SEM - Free Report) announced that its executive chairman has submitted a take-private proposal to the board. The company acknowledged the proposal publicly, indicating the board is reviewing it. The non-binding indication of interest signals a payment of $16 to $16.20 per share for the outstanding stocks. It indicates a premium of up to 15.6% from Monday’s closing price of $14.01.

The proposal comes from Robert A. Ortenzio, executive chairman, co-founder and director, meaning someone already holding a leadership stake is offering to buy out the public shares and convert the company to private ownership. While this is not yet a definitive agreement, but it opens the door to negotiations. The move suggests the executive believes there is value in the business that may be unlocked off-market.

Take-private deals change the whole dynamic of a company. For shareholders, it means the public market liquidity disappears and the risk/return profile shifts. For SEM, a take-private means the company may be able to act with more strategic flexibility and possibly execute longer-term plans. It also signals confidence from the insider leadership that the company is undervalued or has significant upside.

Over the past year, SEM plunged 63.8%, underperforming the industry’s 42.3% decline, due to worries about sustainability, rising costs, uncertainty around government funding and other sector-wide challenges.

Zacks Investment Research Image Source: Zacks Investment Research

This has led to a valuation of 10.43X forward earnings, lower than its five-year median of 12.32X and the industry average of 15X. Its rehabilitation hospital segment witnesses rising occupancy, admissions and patient days.

SEM’s Zacks Rank & Other Key Picks

Select Medical currently has a Zacks Rank #2 (Buy). Some other top-ranked and promising stocks in the broader Medicalsector are Aveanna Healthcare (AVAH - Free Report) and The Pennant Group (PNTG - Free Report) , each carrying a Zacks Rank #2 at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Aveanna’s current-year earnings indicates an 800% year-over-year improvement. The consensus mark for Aveanna’s revenues of $2.4 billion implies 18% growth from the year-ago period.

The Zacks Consensus Estimate for The Pennant Group’s 2025 earnings implies a 22.3% increase from the year-ago reported figure. PNTG beat earnings estimates in three of the trailing four quarters and missed once, with an average surprise of 6.5%. The consensus mark for The Pennant Group’s current-year revenues is pegged at $932.7 million, which indicates a 34.2% year-over-year increase.

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