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Hospital Multiples: SunLink (AMEX: SSY) Sells Final Hospital, Trace Regional, for $8m (0.55x Rev)

Edit: The deal price was revised to $2.5m on January 29, 2024.

SunLink Health Systems, Inc. (AMEX: SSY) announced it has signed an agreement with Progressive Health Group to sell the subsidiary that owns Trace Regional Medical Center (TRMC), which includes a 24-bed medical/surgical hospital, an 18-bed psychiatric unit, a 66-bed skilled nursing facility, and three outpatient clinics in Houston, Mississippi, for approximately $8 million. This represents the last of six healthcare facility divestitures by SunLink spread out over the past 11 years.

According to Progressive Health Group CEO Quentin Whitwell, the first thing they plan to do as new owners of TRMC is "open back the emergency room 24/7." Progressive Health Group owns or co-owns Panola Medical Center, Quitman Community Hospital, and other health care facilities in Mississippi.

Hospital Revenue Multiples

According to SunLink's SEC filings, its healthcare services unit (TRMC) generated revenue of ~$14.4m and an EBITDA loss (~-$2m) in FY 2023, implying a revenue multiple of 0.55x for the deal. This is above the 90th percentile for small, unprofitable hospital transactions (sub $40m revenue).

Small, Unprofitable Hospital Revenue Multiples

Post-Transaction SunLink

I'm a valuation professional and database purveyor, not a securities analyst, and this is definitely not a recommendation even if I were qualified in the area. SunLink is tiny, extremely illiquid (to the point of being impossible to establish or liquidate a position of any size), has a 99 year old for general counsel (?!?!?!?), appears to have a long history of funding corporate expenses with proceeds from asset sales, and definitely has a long history of poor stock performance. But... it looks like the post-transaction entity has ~$4.5m of net cash as of June 30, 2023, negligible debt, the ~$7.5m expected net proceeds from the pending sale of TRMC, and a remaining institutional pharmacy business with ~$33.5m revenue and ~$3.5m EBITDA in FY 2023 (2023 is a positive outlier in terms of historical profitability and there are ~$2m of annual corporate expenses to cover). With 7,031,603 shares outstanding and a share price of $0.66 as of this writing, that works out to a market capitalization of ~$4.6m. This has the look of a dollar selling for 20 cents (but for good reason).

About Scope Research

The Scope Research Healthcare M&A Valuation Database currently has financial details for 315 general acute care hospital deals going back to 2013, 181 of which include reported EBITDA multiples. The general hospital database can be purchased individually, while our affordable annual subscriptions provide access to all of our healthcare M&A databases and segments, updated continuously.

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