UPDATE 1-PE firm, Prospect Medical mgmt to buy co for $205 mln

Mon Aug 16, 2010 11:21am EDT

* Deal of $8.50 a share at 39 pct premium to Friday close

* Most shareholders to get cash for shares

* Certain Prospect insiders to also get stake in acquirer

Aug 16 (Reuters) - Healthcare and physician services provider Prospect Medical Holdings Inc PZZ.O said it agreed to be bought out by private-equity firm Leonard Green & Partners and its own management in a $205 million deal.

The deal values the operator of five Los Angeles-area hospitals at $8.50 a share, a premium of 39 percent to Prospect's Friday close. The shares were trading at $8.41 Monday morning on Nasdaq.

Prospect said certain insiders have committed their 10.4 million shares -- or nearly 50 percent of the company's outstanding shares -- in support of the deal, with 4.2 million of those shares to be exchanged for cash and the remainder in stock of the acquiring entity, set up by Leonard Green.

Under the deal, Prospect has the right to seek competing acquisition proposals from third parties during the 40-day period ending Sept. 25.

UBS Investment Bank advised Prospect on the deal. (Reporting by Shravya Jain in Bangalore; Editing by Anthony Kurian)

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