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Centegra Health System, Northwestern Medicine begin merger

The Centegra Health System and Northwestern Medicine merger is complete, and changes are ahead for the health system.

The health systems signed a definitive agreement in June to complete the merger Sept. 1. In the proposed transaction, Northwestern would become the sole corporate member of Centegra Health System, and would have the power to govern, direct and oversee the property, funds, businesses and affairs of Centegra, according to a filing with the Illinois Health Facilities and Services Review Board.

“Saturday is just the beginning of the transition to Northwestern Medicine,” Centegra spokeswoman Michelle Green said in a statement. “For the past several months, we have been working with Northwestern Medicine on how our corporate structure and business systems will blend into Northwestern. This process will take time, and we are excited for our future.”

Signage and branding changes are expected in the next week, Green said.

For purposes of the sale, Centegra is valued between $82.2 million and
$116.2 million, considering its net long-term liabilities, according to the filing.

The merger has been in the works for two years. The health systems signed a letter of intent to discuss an affiliation in 2016, and in June 2017, representatives said it was likely that Centegra would join Northwestern by the end of the year. That didn’t happen, and officials in February said the merger likely will be complete in 2018.

The changes come after a tough financial year for Centegra. Centegra had
$21.3 million in operating losses for the final six months of 2017, according to the most recent unaudited financial statement found on Electronic Municipal Market Access, a municipal security website. The most recent filings available for Northwestern show it had a gain of $88.5 million for the final three months through the end of February.

Fitch Ratings placed a negative watch in May on two series of Centegra’s outstanding bonds, pending the Northwestern Medicine acquisition.

This means the organization would have expected a downgrade in Centegra’s ratings – potentially by multiple notches – if financial improvement does not occur “promptly” after the merger, according to the analysis.

Northwestern is expected to provide Centegra the resources and enhanced profile needed to stay competitive while also reducing operating expenses, according to the Fitch Ratings report.

“The acquisition should translate to a significant change for Centegra,” the report reads.

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