Universal American Completes Acquisition Of APS Healthcare

Universal American Corp. (NYSE: UAM) today announced that it has completed its acquisition of APS Healthcare, a leading provider of specialty healthcare solutions primarily to Medicaid agencies.

The transaction significantly enhances Universal American’s breadth of capabilities to participate in the emerging growth opportunities in healthcare, including the large dual eligible opportunity. APS Healthcare brings a full range of healthcare solutions, including case management and care coordination, clinical quality and utilization review, and behavioral health services that enable its customers to reduce healthcare costs and improve the quality of their care. APS Healthcare’s 400 customers include Medicaid Agencies, state and local governments, health plans, employers and labor trust groups. The company serves approximately 30 government programs in 25 states and Puerto Rico covering over 17 million members, making it one of the largest specialty healthcare services companies in the country. APS Healthcare, headquartered in White Plains, NY, had 2011 revenues of more than $300 million and 2011 EBITDA 1 estimated at approximately $31 million.

“We are delighted to welcome the talented APS Healthcare team into the Universal American family,” said Richard Barasch, Chairman and CEO of Universal American. “With this transaction, we now have the capabilities to participate in the large and growing Medicaid market, including the dual eligible opportunity.”

Additional Transaction Details
  • The purchase price for the transaction is (i) $227.5 million, consisting of approximately $150.5 million in cash to retire APS Healthcare’s outstanding indebtedness and other liabilities and approximately $77.0 million in Universal American common stock, plus (ii) up to $50 million in potential performance based consideration, payable in cash in March 2014 to the extent APS Healthcare’s financial results exceed certain thresholds.
  • To fund the equity portion of the purchase price, at closing, Universal American issued 6,504,461 shares of its common stock to funds affiliated with the private equity firm GTCR and other former equity holders of APS Healthcare, representing approximately 7.4% of Universal American’s outstanding common stock. At closing, David Katz, a Principal at GTCR, was appointed to the Universal American board of directors.
  • To fund the cash portion of the purchase price, at closing, Universal American entered into a new $225 million Credit Facility with a group of lenders led by BofA Merrill Lynch, consisting of a $150 million term loan and a $75 million revolving credit facility, which was undrawn at closing.

1 The Company has not included a reconciliation of 2011 estimated EBITDA for APS Healthcare to net income because certain of the components of this reconciliation are not finalized at this time.

About Universal American Corp.

Universal American (NYSE: UAM), through our family of healthcare companies, provides health benefits and services to people covered by Medicare and/or Medicaid. We are dedicated to working collaboratively with healthcare professionals in order to reduce healthcare costs and improve the health and well-being of those we serve. For more information on Universal American, please visit our website at www.UniversalAmerican.com.

Forward Looking Statements

This news release and oral statements made from time to time by our executive officers may contain "forward-looking" statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, known as the PSLRA. Such statements that are not historical facts are hereby identified as forward-looking statements and intended to be covered by the safe harbor provisions of the PSLRA and can be identified by the use of the words "believe," "expect," "predict," "project," "potential," "estimate," "anticipate," "should," "intend," "may," "will," and similar expressions or variations of such words, or by discussion of future financial results and events, strategy or risks and uncertainties, trends and conditions in our business and competitive strengths, all of which involve risks and uncertainties.

Where, in any forward-looking statement, we or our management expresses an expectation or belief as to future results or actions, there can be no assurance that the statement of expectation or belief will result or be achieved or accomplished. Our actual results may differ materially from our expectations, plans or projections. We warn you that forward-looking statements are only predictions and estimates, which are inherently subject to risks, trends and uncertainties, many of which are beyond our ability to control or predict with accuracy and some of which we might not even anticipate. We give no assurance that we will achieve our expectations and we do not assume responsibility for the accuracy and completeness of the forward-looking statements. Future events and actual results, financial and otherwise, may differ materially from the results discussed in the forward-looking statements as a result of many factors, including the risk factors described in the risk factor section of our SEC reports. A summary of the information set forth in the "Risk Factors" section of our SEC reports and other risks includes, but is not limited to the following: we are subject to extensive government regulation; the CMS sanction that suspended us from marketing to and enrolling new members in our Medicare Advantage plans during the 2011 annual enrollment period had and may continue to have a material adverse effect on the Medicare Advantage business, financial condition and results of operations; the potential that CMS and/or other regulators could impose significant fines, penalties or operating restrictions on the Company; recently enacted healthcare legislation and subsequent rules promulgated by CMS could have a material adverse effect on our opportunities for growth and our financial results; we may continue to experience membership losses in our Medicare Advantage business; reductions in funding for Medicare programs could materially reduce our profitability; we may invest significant capital and management attention in new business opportunities, including accountable care organizations, that may not be successful; failure to reduce our operating costs could have a material adverse effect on our financial position, results of operations and cash flows; competition in the insurance and healthcare industries is intense, and if we do not design and price our products properly and competitively, our membership and profitability could decline; our reserves may not be adequate; we may not be able to improve our CMS star ratings which may cause certain of our plans to be terminated or to receive less bonuses or rebates than our competitors; we may experience higher than expected loss ratios which could materially adversely affect our results of operations; compliance with laws and regulations is complex and expensive, and any violation of the laws and regulations applicable to us could reduce our revenues and profitability and otherwise adversely affect our operating results and/or impact our ability to sell Medicare products; changes in governmental regulation or legislative reform could increase our costs of doing business and adversely affect our profitability; our Medicare Advantage business is subject to an annual competitive bidding process that could adversely affect our profitability; CMS’s risk adjustment payment system, including the results of any RADV audits, and budget neutrality factors make our revenue and profitability difficult to predict and could result in material retroactive adjustments to our results of operations; if we are unable to develop and maintain satisfactory relationships with the providers of care to our members, our profitability could be adversely affected and we may be precluded from operating in some markets; substantially all our revenues are tied to our Medicare businesses and regulated by CMS and if our government contracts are not renewed or are terminated, our business could be substantially impaired; we derive a substantial portion of our Medicare Advantage revenues and profits from Medicare Advantage HMO operations in Texas, and legislative actions, economic conditions or other factors that adversely affect those operations could materially reduce our revenues and profits; we may incur losses in our long-term care insurance business; any failure by us to manage our operations or to successfully complete or integrate acquisitions, dispositions and other significant transactions could harm our financial results, business and prospects; we may be unable to access sources of financing; the historical consolidated financial information of old Universal American is not necessarily representative of our future financial position, future results of operations or future cash flows nor do they reflect what our financial position, results of operations or cash flows would have been as a stand-alone company during the periods presented; future sales of our common stock by our significant shareholders may depress the market price of our common stock; problems may arise in successfully integrating the APS Healthcare business, which may result in Universal American not operating as effectively and efficiently as expected or failing to achieve the expected benefits of the transaction; Universal American may be unable to achieve cost-cutting synergies arising out of the transaction or it may take longer than expected to achieve those synergies; the APS Healthcare transaction may involve unexpected costs, unexpected liabilities or unexpected delays. Other unknown or unpredictable factors could also have material adverse effects on future results, performance or achievements of Universal American.

All forward-looking statements included in this release are based upon information available to Universal American as of the date of the release, and we assume no obligation to update or revise any such forward-looking statements.

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