HealthSouth to Sell Surgical Unit for $945 million

HealthSouth Corporation today announced an agreement to sell its Surgery Division to TPG for approximately $945 million. TPG is a private investment partnership that was founded in 1992 and currently has more than $30 billion of assets under management. The purchase price consists of cash consideration of approximately $920 million and an equity interest whereby HealthSouth has the opportunity to participate in the future success of the newly formed company. This future consideration is estimated to be worth $25 million to $30 million, assuming a five-year horizon.

HealthSouth’s Surgery Division is comprised of a network of 139 outpatient surgery centers and three surgical hospitals. The facilities are located in 35 states, with a concentration of centers in California, Texas, Florida, North Carolina, and Alabama. The new company will be among the nation’s largest providers of outpatient surgical services. The transaction is expected to be completed in the third quarter 2007, and is subject to customary closing conditions, including regulatory approval.

"Today’s announcement marks a major milestone in the strategic repositioning of HealthSouth as a post-acute healthcare provider, focusing on inpatient rehabilitative services. The proceeds from this transaction will be used to pay down a significant portion of our long-term debt, thereby strengthening our balance sheet and positioning us to grow our core business," said Jay Grinney, HealthSouth president and chief executive

officer. "We conducted a rigorous auction process and we congratulate TPG on being the winning bidder. TPG is a well-respected firm with extensive experience in the healthcare industry. We look forward to working with them to ensure a smooth transition as our Surgery Division becomes a stand-alone entity."

"TPG is excited about the opportunity to partner with a strong management team and to invest in the largest operator of multi-specialty surgical centers," said Todd Sisitsky, principal at TPG. "We believe that the Surgery Division has excellent growth prospects as a stand-alone business, and look forward to working with management and the facilities’ world-class physician base to help the company achieve its full potential."

Certain members of HealthSouth’s senior management team including Mike Snow, chief operating officer, and Joe Clark, president of the surgery division, will be leaving HealthSouth to join the newly formed company, which is expected to remain headquartered in Birmingham, Ala.

Goldman, Sachs & Co. served as HealthSouth’s financial advisor for this transaction.