1001-00001 · Ardent Capital Partners · Early Termination

early-termination-request-letter.docx DOCUMENT Antitrust

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CALDERWOOD & HARKNESS LLP Attorneys at Law

600 Lexington Avenue New York, NY 10022

Telephone: (212) 558-4000 Facsimile: (212) 558-3588 www.calderwoodharkness.com

February 16, 2024

VIA ELECTRONIC FILING AND HAND DELIVERY

Premerger Notification Office Bureau of Competition Federal Trade Commission 600 Pennsylvania Avenue NW Washington, DC 20580

Director of Operations and Merger Enforcement Antitrust Division United States Department of Justice 950 Pennsylvania Avenue NW Washington, DC 20530

Re: Request for Early Termination of the Waiting Period Pursuant to Section 7A(b)(2) of the Clayton Act, 15 U.S.C. § 18a(b)(2)

Transaction: Acquisition of Pinnacle Health Systems, Inc. by Ardent Capital Partners III LP

HSR Transaction No.: 20241487 (reference to be confirmed upon receipt of PNO confirmation; Notification and Report Form submitted contemporaneously herewith)

Dear Sir or Madam:

I. Introduction and Purpose

Calderwood & Harkness LLP represents Ardent Capital Partners III LP ("Ardent Capital" or the "Acquiring Person"), a Delaware limited partnership, as antitrust counsel in connection with its proposed acquisition of 100% of the outstanding equity interests of Pinnacle Health Systems, Inc. ("Pinnacle" or the "Target" or the "Acquired Person"), a Delaware corporation (the "Proposed Transaction" or the "Transaction"). We write on behalf of our client to respectfully request that the Federal Trade Commission (the "Commission" or the "FTC") and the Antitrust Division of the United States Department of Justice (the "Division" or the "DOJ" and, together with the Commission, the "Agencies") grant early termination of the initial thirty (30) day waiting period applicable to the Transaction under Section 7A(b)(2) of the Clayton Act, 15 U.S.C. § 18a(b)(2).

On behalf of Ardent Capital, we are filing today the Notification and Report Form (the "HSR Filing" or the "Notification") required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and the implementing rules promulgated thereunder at 16 C.F.R. Parts 801–803. The filing fee of $280,000, calculated under the 2024 FTC filing fee schedule based on the Transaction's aggregate value falling within the $500,000,000 to $999,999,999 tier, has been remitted contemporaneously with the submission of the Notification. The acquired person, Pinnacle, is filing its own Notification and Report Form simultaneously through its antitrust counsel, Greenvale Durneval LLP (Jonathan Felder, Esq., Partner).

As set forth in detail below and in the accompanying voluntary submission filed contemporaneously herewith (the "White Paper"), the Transaction presents no competitive concerns of any kind. There is no horizontal overlap between the Acquiring Person's existing portfolio companies and the Acquired Person in any relevant product or geographic market. The Transaction produces zero change in market concentration in every relevant market. Only a competitively insignificant vertical relationship exists between certain portfolio company facilities and Target facilities, and this relationship involves de minimis, non-exclusive referral patterns. Accordingly, we respectfully submit that this Transaction is an ideal candidate for early termination.

II. Description of the Transaction

A. The Parties

1. Acquiring Person — Ardent Capital Partners III LP. The Acquiring Person is Ardent Capital Partners III LP, a Delaware limited partnership, with its principal office located at 399 Park Avenue, 41st Floor, New York, NY 10022 (EIN: 87-3421098). Ardent Capital Partners III LP is the fund vehicle through which the Transaction will be consummated.

The general partner of Ardent Capital Partners III LP is Ardent Capital GP III LLC, a Delaware limited liability company (EIN: 86-2198403). The investment manager and fund sponsor is Ardent Capital Management LLC, a Delaware limited liability company and registered investment adviser with the U.S. Securities and Exchange Commission (SEC File No. 801-119247; EIN: 84-5567312). For purposes of the HSR Act, Ardent Capital Management LLC has been identified as the Ultimate Parent Entity ("UPE") of the Acquiring Person, as it exercises operational and investment control over Ardent Capital Partners III LP and its general partner.

Ardent Capital Management LLC was co-founded by Julian Desmond and Priya Chandrasekar, who serve as Managing Partners and are the firm's senior decision-makers. Ardent Capital is a middle-market private equity firm focused on three core sectors: healthcare services, business services, and specialty industrials. The firm has raised four institutional funds to date. Fund III, the vehicle through which the Transaction will be consummated, held its final close in November 2021 with total committed capital of approximately $4.8 billion. Across all funds, Ardent Capital has completed twenty-three (23) platform acquisitions and over sixty (60) add-on acquisitions. Ardent Capital's existing healthcare services portfolio companies are described in detail in Section IV.A below.

2. Acquired Person — Pinnacle Health Systems, Inc. The Acquired Person is Pinnacle Health Systems, Inc., a Delaware corporation headquartered at 2200 Lakeshore Boulevard, Suite 500, Charlotte, NC 28202 (EIN: 56-4389201). Pinnacle is led by Dr. Marcus Ellsworth, who serves as Chief Executive Officer and Chairman of the Board of Directors, and Sandra Trevino, who serves as Chief Financial Officer.

Pinnacle is a specialty healthcare services platform that owns and operates forty-two (42) ambulatory surgical centers ("ASCs") and manages thirty-one (31) affiliated physician practice management entities across nine states: North Carolina, South Carolina, Virginia, Tennessee, Georgia, Florida, Alabama, Ohio, and Texas. Pinnacle employs approximately 4,700 individuals across its network. The company was founded in 2009 by Dr. Ellsworth and has grown organically and through acquisitions over the subsequent fifteen years.

Pinnacle's operations are classified under the following North American Industry Classification System ("NAICS") codes: 621111 (Offices of Physicians) and 621493 (Freestanding Ambulatory Surgical and Emergency Centers). For its fiscal year ending December 31, 2023 ("FY 2023"), Pinnacle reported total revenue of approximately $637.4 million, earnings before interest, taxes, depreciation, and amortization ("EBITDA") of approximately $98.2 million, and total assets of approximately $812 million.

3. Selling Sponsor — Veltrano Equity Holdings LLC. Pinnacle's current controlling stockholder is Veltrano Equity Partners Fund V LP, an investment fund managed by Veltrano Equity Holdings LLC, a Delaware limited liability company headquartered at 1400 Elm Street, Suite 3200, Dallas, TX 75201. The managing member of Veltrano Equity Holdings LLC is Theodore "Ted" Hargrove. Veltrano acquired its controlling interest in Pinnacle in 2017 for an enterprise value of approximately $340 million and currently holds approximately 62.3% of Pinnacle's pre-transaction equity. The remaining equity is held by management and certain minority co-investors. In connection with the Transaction, Veltrano will dispose of its entire equity interest in Pinnacle.

B. Transaction Structure and Consideration

The Transaction is structured as a 100% stock purchase in which Ardent Capital will acquire all of the outstanding shares of capital stock of Pinnacle. The terms of the Transaction are governed by an Equity Purchase Agreement (the "EPA"), which was duly executed by the parties on January 31, 2024.

The principal economic terms of the Transaction are as follows:

• Enterprise Value: $952 million

• Equity Value: $534 million (enterprise value of $952 million less net debt of approximately $418 million, subject to customary closing adjustments for working capital, cash on hand, and transaction expenses)

• Cash Consideration: $505.5 million payable at closing to the selling stockholders

• Rollover Equity: Approximately $28.5 million in rollover equity from continuing management, consisting of Dr. Marcus Ellsworth, who will retain approximately 3.0% of post-closing equity in a new holding company to be established by Ardent Capital

• EV/EBITDA Multiple: Approximately 9.7x based on FY 2023 Adjusted EBITDA

• Expected Closing Date: On or before June 30, 2024, which is the outside date specified in Section 8.1(b) of the EPA

C. Financing. The Transaction will be financed through a combination of equity from Ardent Capital Partners III LP and third-party debt financing. The debt financing arrangements are as follows:

• Senior Secured First Lien Term Loan B: $410 million, arranged and underwritten by Provident National Bank, N.A., which will serve as the administrative agent under the senior credit agreement

• Revolving Credit Facility: $55 million (undrawn at closing), also provided under the senior credit agreement with Provident National Bank, N.A. as administrative agent

• Second Lien Term Loan: $95 million, to be provided by Atlas Credit Opportunities Fund LP

Total committed debt financing for the Transaction is $560 million. Net debt at closing is expected to be approximately $418 million after giving effect to the repayment of Pinnacle's existing indebtedness, the payment of transaction-related fees and expenses, and other customary closing adjustments. Ardent Capital has received fully committed financing letters from each of the foregoing lenders, copies of which have been provided to the Premerger Notification Office in connection with the HSR Filing as required.

III. HSR Jurisdictional Analysis

A. Size-of-Transaction Test

The Transaction is reportable under the HSR Act because the aggregate total amount of voting securities and assets to be acquired exceeds the applicable size-of-transaction threshold. Specifically, the Transaction's enterprise value of $952 million substantially exceeds the 2024 size-of-transaction threshold of $111.4 million as adjusted by the FTC pursuant to Section 7A(a)(2) of the Clayton Act, 15 U.S.C. § 18a(a)(2), and 16 C.F.R. § 801.1(h). The filing obligation is therefore triggered irrespective of the size-of-person test, although, as demonstrated below, the size-of-person test is independently satisfied.

B. Size-of-Person Test

Both parties to the Transaction independently satisfy the applicable size-of-person thresholds under 15 U.S.C. § 18a(a)(2):

• Acquiring Person: Ardent Capital Management LLC, the UPE of the Acquiring Person, manages Ardent Capital Partners III LP, which has total committed capital (and corresponding assets under management) of approximately $4.8 billion. This amount substantially exceeds the 2024 size-of-person threshold of $22.3 million applicable under the HSR Act.

• Acquired Person: Pinnacle Health Systems, Inc. reported FY 2023 annual net sales of approximately $637.4 million and total assets of approximately $812 million. Each of these figures substantially exceeds the 2024 size-of-person threshold of $22.3 million.

Accordingly, both parties to the Transaction satisfy the size-of-person thresholds, and the filing obligation is confirmed under both prongs of the HSR Act's jurisdictional test.

C. Filing Fee

The Transaction value of $952 million falls within the $500,000,000 to $999,999,999 tier under the 2024 FTC filing fee schedule as established pursuant to Section 605 of the Consolidated Appropriations Act, 2023. The applicable filing fee is $280,000. This fee has been paid by Ardent Capital in accordance with its obligation under Section 5.4(a) of the EPA, which allocates the HSR filing fee to the Acquiring Person.

IV. Basis for Early Termination — Absence of Competitive Concerns

We respectfully submit that early termination of the waiting period is warranted because the Transaction presents no horizontal overlap, no meaningful change in concentration in any relevant market, and only a competitively insignificant vertical relationship between the parties. Each of these points is addressed in detail below.

A. No Horizontal Overlap

Ardent Capital, through its existing portfolio companies and affiliated entities, does not own, operate, manage, or hold any interest in any ambulatory surgical center, physician practice management entity, or any other business that competes with Pinnacle in any product or geographic market. The Transaction is a classic private-equity acquisition by a financial sponsor of a platform company operating in a product market in which the sponsor has no pre-existing presence.

Ardent Capital's current healthcare services portfolio consists of two platform companies:

(1) Marlowe Asset Management Rehabilitation Holdings LLC ("Marlowe Asset Management Rehabilitation"): Marlowe Asset Management Rehabilitation owns and operates seventy-four (74) outpatient physical therapy clinics in the states of Texas, Florida, and Georgia. Marlowe Asset Management Rehabilitation is headquartered at 8950 Westheimer Road, Suite 600, Houston, TX 77063. Marlowe Asset Management Rehabilitation provides outpatient physical therapy, occupational therapy, and sports rehabilitation services. It does not operate ambulatory surgical centers, does not provide surgical services of any kind, and does not engage in physician practice management.

(2) Clearpath Diagnostics Inc. ("Clearpath Diagnostics"): Clearpath Diagnostics is an independent clinical laboratory services company operating in the states of Pennsylvania, New Jersey, and New York. Clearpath Diagnostics is headquartered at 1700 Market Street, Suite 3400, Philadelphia, PA 19103, and reported FY 2023 revenue of approximately $218 million. Clearpath Diagnostics provides clinical and anatomic pathology laboratory testing services to physicians, hospitals, and other healthcare providers. It does not operate ambulatory surgical centers, does not perform surgical procedures, and does not engage in physician practice management.

Neither Marlowe Asset Management Rehabilitation nor Clearpath Diagnostics operates in the same product markets as Pinnacle. The distinct product market classifications are as follows:

• Physical therapy services (Marlowe Asset Management Rehabilitation) and ambulatory surgical center / physician practice management services (Pinnacle) are recognized as distinct product markets. Outpatient physical therapy is a post-acute care service that may be complementary to, but is not substitutable for, ambulatory surgical services. Patients, physicians, and payors do not view physical therapy clinics and ambulatory surgical centers as alternatives to one another.

• Clinical laboratory services (Clearpath Diagnostics) constitute a separate and distinct product market from both ambulatory surgical center services and physician practice management services. Laboratory testing is a diagnostic service, not a surgical or procedural service, and serves fundamentally different clinical and commercial functions. Moreover, Clearpath Diagnostics operates exclusively in Pennsylvania, New Jersey, and New York — states in which Pinnacle has no operations whatsoever — resulting in no geographic overlap in addition to no product market overlap.

In sum, Ardent Capital's existing healthcare portfolio has zero horizontal overlap with the Target's operations in any relevant product or geographic market. The Transaction is purely a change of financial ownership and sponsorship.

B. Relevant Product Markets

For purposes of the competitive analysis presented herein, the relevant product markets in which Pinnacle participates are:

1. Ambulatory Surgical Center Services (Multi-Specialty): Pinnacle's forty-two ASCs provide outpatient surgical procedures across multiple specialties, including orthopedics, gastroenterology, ophthalmology, pain management, and general surgery. ASC services are properly defined as a distinct product market because ambulatory surgical centers serve as an alternative to hospital outpatient departments ("HOPDs") for a defined set of surgical procedures that can be safely performed on an outpatient basis. The competitive dynamics of ASC services — including negotiations with managed care payors, physician recruitment, facility licensing, and certificate-of-need requirements — are distinct from those governing other healthcare service categories.

2. Physician Practice Management Services: Pinnacle's thirty-one affiliated physician practice management entities provide management and administrative services to physician practices specializing in orthopedics, gastroenterology, and ophthalmology. Physician practice management is a distinct product market encompassing the provision of administrative, billing, coding, compliance, human resources, and operational support services to physician practices under management services agreements.

As demonstrated in Section IV.A above, Ardent Capital has no presence in either of these product markets through any of its existing portfolio companies, fund vehicles, or affiliated entities.

C. Relevant Geographic Markets

Healthcare antitrust analysis typically defines geographic markets at the metropolitan statistical area ("MSA") level, reflecting the local nature of patient demand for ambulatory surgical and physician practice management services. Pinnacle's operational footprint spans nine MSA-level geographic markets, as follows:

1. Charlotte-Concord-Gastonia, NC-SC MSA

2. Raleigh-Cary, NC MSA

3. Richmond, VA MSA

4. Nashville-Davidson-Murfreesboro-Franklin, TN MSA

5. Atlanta-Sandy Springs-Alpharetta, GA MSA

6. Tampa-St. Petersburg-Clearwater, FL MSA

7. Birmingham-Hoover, AL MSA

8. Columbus, OH MSA

9. Dallas-Fort Worth-Arlington, TX MSA

Ardent Capital, including all of its portfolio companies and affiliated entities across all funds, does not own, operate, or manage any ambulatory surgical center or physician practice management entity in any of these nine MSAs. Accordingly, there is no geographic overlap between the Acquiring Person and the Acquired Person with respect to the relevant product markets described above.

We note that Marlowe Asset Management Rehabilitation operates outpatient physical therapy clinics in certain of the same states as Pinnacle (Texas, Florida, and Georgia). However, as demonstrated in Section IV.A, physical therapy services constitute a separate product market from ASC services and physician practice management. Accordingly, the physical proximity of certain Marlowe Asset Management Rehabilitation clinics to certain Pinnacle ASCs does not give rise to any horizontal overlap in a relevant antitrust market. The limited vertical relationship arising from this proximity is addressed separately in Section IV.E below.

D. HHI Analysis — No Change in Concentration

Because there is no horizontal overlap between Ardent Capital's existing portfolio and Pinnacle in any relevant product or geographic market, the Proposed Transaction produces zero change in Herfindahl-Hirschman Index ("HHI") concentration levels in every relevant market. The Transaction is a simple substitution of one financial owner (Veltrano Equity) for another (Ardent Capital), with no aggregation of competing operations.

To illustrate, we provide the following analysis of Pinnacle's largest geographic market:

Charlotte-Concord-Gastonia, NC-SC MSA: In the Charlotte MSA, Pinnacle operates fourteen (14) of approximately sixty-seven (67) ambulatory surgical centers, representing an approximate facility share of 20.9% and an approximate share of ASC net patient revenue of 18.3%. Based on publicly available and commercially obtained data, the pre-transaction HHI for the Charlotte MSA ASC market is approximately 1,280. Because Ardent Capital does not operate any ASC in the Charlotte MSA (or in any other MSA in which Pinnacle operates), the post-transaction HHI remains approximately 1,280. The change in HHI is zero.

The identical zero-delta result obtains across all nine MSAs in which Pinnacle operates. In no market does the Transaction result in any increase in concentration, any elimination of a competitor, or any aggregation of market share. Detailed MSA-by-MSA HHI calculations, including supporting data sources and methodologies, are provided in the accompanying White Paper.

Under the Agencies' 2023 Merger Guidelines, a transaction that produces no change in market concentration raises no presumption of competitive harm. The Transaction falls well below any threshold that would warrant further investigation on horizontal grounds.

E. Limited Vertical Relationship — Competitively Insignificant

The only potential competitive nexus between the Acquiring Person's existing portfolio and the Acquired Person involves a limited vertical relationship between certain Marlowe Asset Management Rehabilitation outpatient physical therapy clinics and certain Pinnacle ASCs. Specifically, twelve (12) Marlowe Asset Management Rehabilitation clinics are co-located with or geographically adjacent to Pinnacle ASCs in the states of Texas, Florida, and Georgia.

This vertical relationship is competitively insignificant for several reasons:

• De minimis referral volume. The referral volume between the twelve co-located Marlowe Asset Management Rehabilitation clinics and the adjacent Pinnacle ASCs is de minimis. In FY 2023, referrals from Pinnacle-affiliated physicians to these twelve Marlowe Asset Management Rehabilitation clinics accounted for less than 2.4% of total patient volume at those Marlowe Asset Management Rehabilitation clinics, and referrals from Marlowe Asset Management Rehabilitation clinics to Pinnacle ASCs accounted for less than 0.7% of Pinnacle's ASC procedure volume in the affected markets.

• Non-exclusive relationships. The referral relationships between Marlowe Asset Management Rehabilitation clinics and Pinnacle ASCs are entirely non-exclusive. Pinnacle-affiliated physicians refer patients to numerous physical therapy providers, and Marlowe Asset Management Rehabilitation clinics accept referrals from, and refer patients to, a broad range of surgical centers and physician practices. Neither party has entered into any exclusive referral arrangement, preferred provider agreement, or other contractual commitment that would restrict the ability of physicians or patients to choose among competing providers.

• No foreclosure effect. The combination of Marlowe Asset Management Rehabilitation and Pinnacle under common ownership would not enable Ardent Capital to foreclose rivals in either market. The twelve co-located clinics represent a small fraction of both Marlowe Asset Management Rehabilitation's total clinic base (12 of 74, or approximately 16.2%) and Pinnacle's total ASC base (the adjacent ASCs constitute a subset of 42 total facilities). Moreover, physical therapy services are widely available from numerous competing providers in each of the affected MSAs, and patients retain complete freedom to choose their physical therapy provider. The Proposed Transaction would not alter the competitive dynamics in either the physical therapy or ASC markets.

A detailed analysis of the vertical relationship between Marlowe Asset Management Rehabilitation and Pinnacle, including facility-level data, referral volume analysis, and an assessment of potential foreclosure effects, is provided in the accompanying White Paper.

F. Reference to Voluntary Submission (White Paper)

A comprehensive voluntary submission providing detailed competitive analysis in support of this request for early termination is being submitted simultaneously with this letter and the Notification. The White Paper includes: (i) a thorough description of the relevant product and geographic markets; (ii) detailed market-by-market assessments of competitive conditions in each of the nine MSAs in which Pinnacle operates; (iii) HHI calculations for each relevant market based on publicly available data supplemented by commercially obtained market data; (iv) an analysis of the limited vertical relationship between Marlowe Asset Management Rehabilitation and Pinnacle; and (v) a discussion of barriers to entry, countervailing buyer power (including the role of managed care payors in negotiating ASC reimbursement rates), and other competitive factors demonstrating the absence of any anticompetitive effects arising from the Proposed Transaction.

We respectfully refer the reviewing staff to the White Paper for additional detail supporting the arguments presented in this letter.

V. Item 4(c) and 4(d) Document Production

The Acquiring Person's Notification and Report Form is accompanied by a total of seven (7) responsive documents produced pursuant to Items 4(c) and 4(d) of the HSR Act's Notification and Report Form. These documents consist of the following:

• Three (3) confidential information memoranda and teaser materials prepared by Pinnacle's financial advisor in connection with the sale process and provided to Ardent Capital during due diligence;

• Two (2) internal investment committee memoranda prepared by Ardent Capital Management LLC in connection with the evaluation and approval of the Proposed Transaction;

• One (1) board presentation prepared for the advisory board of Ardent Capital Partners III LP summarizing the investment thesis and key terms of the Proposed Transaction; and

• One (1) email chain among Ardent Capital investment professionals discussing the competitive landscape for ASC services in the southeastern United States.

The Acquired Person is filing eleven (11) responsive documents under Items 4(c) and 4(d) with its Notification and Report Form through its antitrust counsel, Greenvale Durneval LLP. We understand that the Acquired Person's responsive documents include board materials, strategic planning presentations, and internal management analyses.

We respectfully note that none of the documents produced by either the Acquiring Person or the Acquired Person identify any competitive concerns arising from the Proposed Transaction. To the contrary, the documents consistently reflect the financial and operational rationale for the Transaction — namely, Ardent Capital's interest in acquiring a well-managed, growing ASC platform in a sector that benefits from favorable demographic and reimbursement trends, and Pinnacle's desire to partner with a sponsor that can support continued organic growth and strategic add-on acquisitions.

VI. Contractual Filing Obligations

The EPA contains several provisions relevant to the parties' HSR Act obligations and the timeline for the Proposed Transaction:

• Section 5.4(a) — Filing Obligation and Fee Allocation: Under Section 5.4(a) of the EPA, the parties are obligated to file their respective HSR Act Notification and Report Forms within fifteen (15) business days of the execution date of the EPA (January 31, 2024). The contractual filing deadline is therefore February 22, 2024. Both filings are being submitted today, February 16, 2024, four (4) business days ahead of the contractual deadline. The HSR filing fee is allocated to and paid by Ardent Capital.

• Section 5.4(c) — Efforts Covenant: Under Section 5.4(c) of the EPA, Ardent Capital has covenanted to use "reasonable best efforts" to obtain all regulatory approvals, including HSR Act clearance, as promptly as practicable. This request for early termination is consistent with that covenant.

• Section 6.1(c) — Condition to Closing: Under Section 6.1(c) of the EPA, the expiration or early termination of the applicable waiting period under the HSR Act is a mutual condition to the parties' respective obligations to consummate the closing of the Transaction. Accordingly, the grant of early termination would facilitate the orderly and timely completion of the Transaction, to the mutual benefit of all parties and their respective stakeholders.

VII. Request and Conclusion

For the reasons set forth herein and in the accompanying White Paper, we respectfully request that the Commission and the Division grant early termination of the initial thirty (30) day waiting period under Section 7A(b)(2) of the Clayton Act, 15 U.S.C. § 18a(b)(2). Absent the grant of early termination, the waiting period would expire on March 17, 2024 (thirty calendar days from the date of filing).

In summary, the Proposed Transaction raises no competitive concerns warranting investigation or further review:

• There is no horizontal overlap between Ardent Capital's existing portfolio companies and Pinnacle in any relevant product or geographic market. Ardent Capital does not own, operate, or manage any ambulatory surgical center or physician practice management entity.

• There is no change in market concentration in any relevant market. The Transaction produces a zero-delta HHI result in all nine MSAs in which Pinnacle operates.

• The only potential competitive nexus — a limited vertical relationship between twelve Marlowe Asset Management Rehabilitation physical therapy clinics and certain co-located Pinnacle ASCs — is competitively insignificant, involving de minimis, non-exclusive referral volumes and no foreclosure potential.

The Transaction is a straightforward change of private equity sponsorship that will not alter the competitive landscape in any market. It is precisely the type of transaction for which the Agencies have historically granted early termination.

Undersigned counsel and the filing party are available to respond to any questions the staff may have or to provide any additional information that may be required to facilitate the review of this request. We would welcome the opportunity to discuss the Transaction with reviewing staff at the Agencies' earliest convenience.

Please direct any questions or inquiries regarding the Acquiring Person's filing to:

Howard Bellamy, Partner Calderwood & Harkness LLP 600 Lexington Avenue New York, NY 10022 Telephone: (212) 558-4127

Email: hbellamy@calderwoodharkness.com

Monica Reyes, Associate Calderwood & Harkness LLP 600 Lexington Avenue New York, NY 10022 Telephone: (212) 558-4293

Email: mreyes@calderwoodharkness.com

We thank the Commission and the Division for their consideration of this request.

Respectfully submitted,

CALDERWOOD & HARKNESS LLP

By: ________

Howard Bellamy Partner

600 Lexington Avenue New York, NY 10022 Telephone: (212) 558-4127

Email: hbellamy@calderwoodharkness.com

On behalf of Ardent Capital Partners III LP

cc: (via email)

Julian Desmond, Co-Founder & Managing Partner, Ardent Capital Management LLC

Priya Chandrasekar, Co-Founder & Managing Partner, Ardent Capital Management LLC

David Ostrander, Esq., Whitfield & Crane LLP (transaction counsel to Ardent Capital Partners III LP)

Jonathan Felder, Esq., Greenvale Durneval LLP (antitrust counsel to Pinnacle Health Systems, Inc.)

Catherine "Kate" Yardley, Esq., Fendowell Thornton LLP (transaction counsel to Pinnacle Health Systems, Inc. and Veltrano Equity Holdings LLC)

CALDERWOOD & HARKNESS LLP Attorneys at Law
600 Lexington Avenue New York, NY 10022
Telephone: (212) 558-4000 Facsimile: (212) 558-3588 www.calderwoodharkness.com
February 16, 2024
VIA ELECTRONIC FILING AND HAND DELIVERY
Premerger Notification Office Bureau of Competition Federal Trade Commission 600 Pennsylvania Avenue NW Washington, DC 20580
Director of Operations and Merger Enforcement Antitrust Division United States Department of Justice 950 Pennsylvania Avenue NW Washington, DC 20530
Re: Request for Early Termination of the Waiting Period Pursuant to Section 7A(b)(2) of the Clayton Act, 15 U.S.C. § 18a(b)(2)
Transaction: Acquisition of Pinnacle Health Systems, Inc. by Ardent Capital Partners III LP
HSR Transaction No.: 20241487 (reference to be confirmed upon receipt of PNO confirmation; Notification and Report Form submitted contemporaneously herewith)
Dear Sir or Madam:
I. Introduction and Purpose
Calderwood & Harkness LLP represents Ardent Capital Partners III LP ("Ardent Capital" or the "Acquiring Person"), a Delaware limited partnership, as antitrust counsel in connection with its proposed acquisition of 100% of the outstanding equity interests of Pinnacle Health Systems, Inc. ("Pinnacle" or the "Target" or the "Acquired Person"), a Delaware corporation (the "Proposed Transaction" or the "Transaction"). We write on behalf of our client to respectfully request that the Federal Trade Commission (the "Commission" or the "FTC") and the Antitrust Division of the United States Department of Justice (the "Division" or the "DOJ" and, together with the Commission, the "Agencies") grant early termination of the initial thirty (30) day waiting period applicable to the Transaction under Section 7A(b)(2) of the Clayton Act, 15 U.S.C. § 18a(b)(2).
On behalf of Ardent Capital, we are filing today the Notification and Report Form (the "HSR Filing" or the "Notification") required under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), and the implementing rules promulgated thereunder at 16 C.F.R. Parts 801–803. The filing fee of $280,000, calculated under the 2024 FTC filing fee schedule based on the Transaction's aggregate value falling within the $500,000,000 to $999,999,999 tier, has been remitted contemporaneously with the submission of the Notification. The acquired person, Pinnacle, is filing its own Notification and Report Form simultaneously through its antitrust counsel, Greenvale Durneval LLP (Jonathan Felder, Esq., Partner).
As set forth in detail below and in the accompanying voluntary submission filed contemporaneously herewith (the "White Paper"), the Transaction presents no competitive concerns of any kind. There is no horizontal overlap between the Acquiring Person's existing portfolio companies and the Acquired Person in any relevant product or geographic market. The Transaction produces zero change in market concentration in every relevant market. Only a competitively insignificant vertical relationship exists between certain portfolio company facilities and Target facilities, and this relationship involves de minimis, non-exclusive referral patterns. Accordingly, we respectfully submit that this Transaction is an ideal candidate for early termination.
II. Description of the Transaction
A. The Parties
1. Acquiring Person — Ardent Capital Partners III LP. The Acquiring Person is Ardent Capital Partners III LP, a Delaware limited partnership, with its principal office located at 399 Park Avenue, 41st Floor, New York, NY 10022 (EIN: 87-3421098). Ardent Capital Partners III LP is the fund vehicle through which the Transaction will be consummated.
The general partner of Ardent Capital Partners III LP is Ardent Capital GP III LLC, a Delaware limited liability company (EIN: 86-2198403). The investment manager and fund sponsor is Ardent Capital Management LLC, a Delaware limited liability company and registered investment adviser with the U.S. Securities and Exchange Commission (SEC File No. 801-119247; EIN: 84-5567312). For purposes of the HSR Act, Ardent Capital Management LLC has been identified as the Ultimate Parent Entity ("UPE") of the Acquiring Person, as it exercises operational and investment control over Ardent Capital Partners III LP and its general partner.
Ardent Capital Management LLC was co-founded by Julian Desmond and Priya Chandrasekar, who serve as Managing Partners and are the firm's senior decision-makers. Ardent Capital is a middle-market private equity firm focused on three core sectors: healthcare services, business services, and specialty industrials. The firm has raised four institutional funds to date. Fund III, the vehicle through which the Transaction will be consummated, held its final close in November 2021 with total committed capital of approximately $4.8 billion. Across all funds, Ardent Capital has completed twenty-three (23) platform acquisitions and over sixty (60) add-on acquisitions. Ardent Capital's existing healthcare services portfolio companies are described in detail in Section IV.A below.
2. Acquired Person — Pinnacle Health Systems, Inc. The Acquired Person is Pinnacle Health Systems, Inc., a Delaware corporation headquartered at 2200 Lakeshore Boulevard, Suite 500, Charlotte, NC 28202 (EIN: 56-4389201). Pinnacle is led by Dr. Marcus Ellsworth, who serves as Chief Executive Officer and Chairman of the Board of Directors, and Sandra Trevino, who serves as Chief Financial Officer.
Pinnacle is a specialty healthcare services platform that owns and operates forty-two (42) ambulatory surgical centers ("ASCs") and manages thirty-one (31) affiliated physician practice management entities across nine states: North Carolina, South Carolina, Virginia, Tennessee, Georgia, Florida, Alabama, Ohio, and Texas. Pinnacle employs approximately 4,700 individuals across its network. The company was founded in 2009 by Dr. Ellsworth and has grown organically and through acquisitions over the subsequent fifteen years.
Pinnacle's operations are classified under the following North American Industry Classification System ("NAICS") codes: 621111 (Offices of Physicians) and 621493 (Freestanding Ambulatory Surgical and Emergency Centers). For its fiscal year ending December 31, 2023 ("FY 2023"), Pinnacle reported total revenue of approximately $637.4 million, earnings before interest, taxes, depreciation, and amortization ("EBITDA") of approximately $98.2 million, and total assets of approximately $812 million.
3. Selling Sponsor — Veltrano Equity Holdings LLC. Pinnacle's current controlling stockholder is Veltrano Equity Partners Fund V LP, an investment fund managed by Veltrano Equity Holdings LLC, a Delaware limited liability company headquartered at 1400 Elm Street, Suite 3200, Dallas, TX 75201. The managing member of Veltrano Equity Holdings LLC is Theodore "Ted" Hargrove. Veltrano acquired its controlling interest in Pinnacle in 2017 for an enterprise value of approximately $340 million and currently holds approximately 62.3% of Pinnacle's pre-transaction equity. The remaining equity is held by management and certain minority co-investors. In connection with the Transaction, Veltrano will dispose of its entire equity interest in Pinnacle.
B. Transaction Structure and Consideration
The Transaction is structured as a 100% stock purchase in which Ardent Capital will acquire all of the outstanding shares of capital stock of Pinnacle. The terms of the Transaction are governed by an Equity Purchase Agreement (the "EPA"), which was duly executed by the parties on January 31, 2024.
The principal economic terms of the Transaction are as follows:
• Enterprise Value: $952 million
• Equity Value: $534 million (enterprise value of $952 million less net debt of approximately $418 million, subject to customary closing adjustments for working capital, cash on hand, and transaction expenses)
• Cash Consideration: $505.5 million payable at closing to the selling stockholders
• Rollover Equity: Approximately $28.5 million in rollover equity from continuing management, consisting of Dr. Marcus Ellsworth, who will retain approximately 3.0% of post-closing equity in a new holding company to be established by Ardent Capital
• EV/EBITDA Multiple: Approximately 9.7x based on FY 2023 Adjusted EBITDA
• Expected Closing Date: On or before June 30, 2024, which is the outside date specified in Section 8.1(b) of the EPA
C. Financing. The Transaction will be financed through a combination of equity from Ardent Capital Partners III LP and third-party debt financing. The debt financing arrangements are as follows:
• Senior Secured First Lien Term Loan B: $410 million, arranged and underwritten by Provident National Bank, N.A., which will serve as the administrative agent under the senior credit agreement
• Revolving Credit Facility: $55 million (undrawn at closing), also provided under the senior credit agreement with Provident National Bank, N.A. as administrative agent
• Second Lien Term Loan: $95 million, to be provided by Atlas Credit Opportunities Fund LP
Total committed debt financing for the Transaction is $560 million. Net debt at closing is expected to be approximately $418 million after giving effect to the repayment of Pinnacle's existing indebtedness, the payment of transaction-related fees and expenses, and other customary closing adjustments. Ardent Capital has received fully committed financing letters from each of the foregoing lenders, copies of which have been provided to the Premerger Notification Office in connection with the HSR Filing as required.
III. HSR Jurisdictional Analysis
A. Size-of-Transaction Test
The Transaction is reportable under the HSR Act because the aggregate total amount of voting securities and assets to be acquired exceeds the applicable size-of-transaction threshold. Specifically, the Transaction's enterprise value of $952 million substantially exceeds the 2024 size-of-transaction threshold of $111.4 million as adjusted by the FTC pursuant to Section 7A(a)(2) of the Clayton Act, 15 U.S.C. § 18a(a)(2), and 16 C.F.R. § 801.1(h). The filing obligation is therefore triggered irrespective of the size-of-person test, although, as demonstrated below, the size-of-person test is independently satisfied.
B. Size-of-Person Test
Both parties to the Transaction independently satisfy the applicable size-of-person thresholds under 15 U.S.C. § 18a(a)(2):
• Acquiring Person: Ardent Capital Management LLC, the UPE of the Acquiring Person, manages Ardent Capital Partners III LP, which has total committed capital (and corresponding assets under management) of approximately $4.8 billion. This amount substantially exceeds the 2024 size-of-person threshold of $22.3 million applicable under the HSR Act.
• Acquired Person: Pinnacle Health Systems, Inc. reported FY 2023 annual net sales of approximately $637.4 million and total assets of approximately $812 million. Each of these figures substantially exceeds the 2024 size-of-person threshold of $22.3 million.
Accordingly, both parties to the Transaction satisfy the size-of-person thresholds, and the filing obligation is confirmed under both prongs of the HSR Act's jurisdictional test.
C. Filing Fee
The Transaction value of $952 million falls within the $500,000,000 to $999,999,999 tier under the 2024 FTC filing fee schedule as established pursuant to Section 605 of the Consolidated Appropriations Act, 2023. The applicable filing fee is $280,000. This fee has been paid by Ardent Capital in accordance with its obligation under Section 5.4(a) of the EPA, which allocates the HSR filing fee to the Acquiring Person.
IV. Basis for Early Termination — Absence of Competitive Concerns
We respectfully submit that early termination of the waiting period is warranted because the Transaction presents no horizontal overlap, no meaningful change in concentration in any relevant market, and only a competitively insignificant vertical relationship between the parties. Each of these points is addressed in detail below.
A. No Horizontal Overlap
Ardent Capital, through its existing portfolio companies and affiliated entities, does not own, operate, manage, or hold any interest in any ambulatory surgical center, physician practice management entity, or any other business that competes with Pinnacle in any product or geographic market. The Transaction is a classic private-equity acquisition by a financial sponsor of a platform company operating in a product market in which the sponsor has no pre-existing presence.
Ardent Capital's current healthcare services portfolio consists of two platform companies:
(1) Marlowe Asset Management Rehabilitation Holdings LLC ("Marlowe Asset Management Rehabilitation"): Marlowe Asset Management Rehabilitation owns and operates seventy-four (74) outpatient physical therapy clinics in the states of Texas, Florida, and Georgia. Marlowe Asset Management Rehabilitation is headquartered at 8950 Westheimer Road, Suite 600, Houston, TX 77063. Marlowe Asset Management Rehabilitation provides outpatient physical therapy, occupational therapy, and sports rehabilitation services. It does not operate ambulatory surgical centers, does not provide surgical services of any kind, and does not engage in physician practice management.
(2) Clearpath Diagnostics Inc. ("Clearpath Diagnostics"): Clearpath Diagnostics is an independent clinical laboratory services company operating in the states of Pennsylvania, New Jersey, and New York. Clearpath Diagnostics is headquartered at 1700 Market Street, Suite 3400, Philadelphia, PA 19103, and reported FY 2023 revenue of approximately $218 million. Clearpath Diagnostics provides clinical and anatomic pathology laboratory testing services to physicians, hospitals, and other healthcare providers. It does not operate ambulatory surgical centers, does not perform surgical procedures, and does not engage in physician practice management.
Neither Marlowe Asset Management Rehabilitation nor Clearpath Diagnostics operates in the same product markets as Pinnacle. The distinct product market classifications are as follows:
• Physical therapy services (Marlowe Asset Management Rehabilitation) and ambulatory surgical center / physician practice management services (Pinnacle) are recognized as distinct product markets. Outpatient physical therapy is a post-acute care service that may be complementary to, but is not substitutable for, ambulatory surgical services. Patients, physicians, and payors do not view physical therapy clinics and ambulatory surgical centers as alternatives to one another.
• Clinical laboratory services (Clearpath Diagnostics) constitute a separate and distinct product market from both ambulatory surgical center services and physician practice management services. Laboratory testing is a diagnostic service, not a surgical or procedural service, and serves fundamentally different clinical and commercial functions. Moreover, Clearpath Diagnostics operates exclusively in Pennsylvania, New Jersey, and New York — states in which Pinnacle has no operations whatsoever — resulting in no geographic overlap in addition to no product market overlap.
In sum, Ardent Capital's existing healthcare portfolio has zero horizontal overlap with the Target's operations in any relevant product or geographic market. The Transaction is purely a change of financial ownership and sponsorship.
B. Relevant Product Markets
For purposes of the competitive analysis presented herein, the relevant product markets in which Pinnacle participates are:
1. Ambulatory Surgical Center Services (Multi-Specialty): Pinnacle's forty-two ASCs provide outpatient surgical procedures across multiple specialties, including orthopedics, gastroenterology, ophthalmology, pain management, and general surgery. ASC services are properly defined as a distinct product market because ambulatory surgical centers serve as an alternative to hospital outpatient departments ("HOPDs") for a defined set of surgical procedures that can be safely performed on an outpatient basis. The competitive dynamics of ASC services — including negotiations with managed care payors, physician recruitment, facility licensing, and certificate-of-need requirements — are distinct from those governing other healthcare service categories.
2. Physician Practice Management Services: Pinnacle's thirty-one affiliated physician practice management entities provide management and administrative services to physician practices specializing in orthopedics, gastroenterology, and ophthalmology. Physician practice management is a distinct product market encompassing the provision of administrative, billing, coding, compliance, human resources, and operational support services to physician practices under management services agreements.
As demonstrated in Section IV.A above, Ardent Capital has no presence in either of these product markets through any of its existing portfolio companies, fund vehicles, or affiliated entities.
C. Relevant Geographic Markets
Healthcare antitrust analysis typically defines geographic markets at the metropolitan statistical area ("MSA") level, reflecting the local nature of patient demand for ambulatory surgical and physician practice management services. Pinnacle's operational footprint spans nine MSA-level geographic markets, as follows:
1. Charlotte-Concord-Gastonia, NC-SC MSA
2. Raleigh-Cary, NC MSA
3. Richmond, VA MSA
4. Nashville-Davidson-Murfreesboro-Franklin, TN MSA
5. Atlanta-Sandy Springs-Alpharetta, GA MSA
6. Tampa-St. Petersburg-Clearwater, FL MSA
7. Birmingham-Hoover, AL MSA
8. Columbus, OH MSA
9. Dallas-Fort Worth-Arlington, TX MSA
Ardent Capital, including all of its portfolio companies and affiliated entities across all funds, does not own, operate, or manage any ambulatory surgical center or physician practice management entity in any of these nine MSAs. Accordingly, there is no geographic overlap between the Acquiring Person and the Acquired Person with respect to the relevant product markets described above.
We note that Marlowe Asset Management Rehabilitation operates outpatient physical therapy clinics in certain of the same states as Pinnacle (Texas, Florida, and Georgia). However, as demonstrated in Section IV.A, physical therapy services constitute a separate product market from ASC services and physician practice management. Accordingly, the physical proximity of certain Marlowe Asset Management Rehabilitation clinics to certain Pinnacle ASCs does not give rise to any horizontal overlap in a relevant antitrust market. The limited vertical relationship arising from this proximity is addressed separately in Section IV.E below.
D. HHI Analysis — No Change in Concentration
Because there is no horizontal overlap between Ardent Capital's existing portfolio and Pinnacle in any relevant product or geographic market, the Proposed Transaction produces zero change in Herfindahl-Hirschman Index ("HHI") concentration levels in every relevant market. The Transaction is a simple substitution of one financial owner (Veltrano Equity) for another (Ardent Capital), with no aggregation of competing operations.
To illustrate, we provide the following analysis of Pinnacle's largest geographic market:
Charlotte-Concord-Gastonia, NC-SC MSA: In the Charlotte MSA, Pinnacle operates fourteen (14) of approximately sixty-seven (67) ambulatory surgical centers, representing an approximate facility share of 20.9% and an approximate share of ASC net patient revenue of 18.3%. Based on publicly available and commercially obtained data, the pre-transaction HHI for the Charlotte MSA ASC market is approximately 1,280. Because Ardent Capital does not operate any ASC in the Charlotte MSA (or in any other MSA in which Pinnacle operates), the post-transaction HHI remains approximately 1,280. The change in HHI is zero.
The identical zero-delta result obtains across all nine MSAs in which Pinnacle operates. In no market does the Transaction result in any increase in concentration, any elimination of a competitor, or any aggregation of market share. Detailed MSA-by-MSA HHI calculations, including supporting data sources and methodologies, are provided in the accompanying White Paper.
Under the Agencies' 2023 Merger Guidelines, a transaction that produces no change in market concentration raises no presumption of competitive harm. The Transaction falls well below any threshold that would warrant further investigation on horizontal grounds.
E. Limited Vertical Relationship — Competitively Insignificant
The only potential competitive nexus between the Acquiring Person's existing portfolio and the Acquired Person involves a limited vertical relationship between certain Marlowe Asset Management Rehabilitation outpatient physical therapy clinics and certain Pinnacle ASCs. Specifically, twelve (12) Marlowe Asset Management Rehabilitation clinics are co-located with or geographically adjacent to Pinnacle ASCs in the states of Texas, Florida, and Georgia.
This vertical relationship is competitively insignificant for several reasons:
• De minimis referral volume. The referral volume between the twelve co-located Marlowe Asset Management Rehabilitation clinics and the adjacent Pinnacle ASCs is de minimis. In FY 2023, referrals from Pinnacle-affiliated physicians to these twelve Marlowe Asset Management Rehabilitation clinics accounted for less than 2.4% of total patient volume at those Marlowe Asset Management Rehabilitation clinics, and referrals from Marlowe Asset Management Rehabilitation clinics to Pinnacle ASCs accounted for less than 0.7% of Pinnacle's ASC procedure volume in the affected markets.
• Non-exclusive relationships. The referral relationships between Marlowe Asset Management Rehabilitation clinics and Pinnacle ASCs are entirely non-exclusive. Pinnacle-affiliated physicians refer patients to numerous physical therapy providers, and Marlowe Asset Management Rehabilitation clinics accept referrals from, and refer patients to, a broad range of surgical centers and physician practices. Neither party has entered into any exclusive referral arrangement, preferred provider agreement, or other contractual commitment that would restrict the ability of physicians or patients to choose among competing providers.
• No foreclosure effect. The combination of Marlowe Asset Management Rehabilitation and Pinnacle under common ownership would not enable Ardent Capital to foreclose rivals in either market. The twelve co-located clinics represent a small fraction of both Marlowe Asset Management Rehabilitation's total clinic base (12 of 74, or approximately 16.2%) and Pinnacle's total ASC base (the adjacent ASCs constitute a subset of 42 total facilities). Moreover, physical therapy services are widely available from numerous competing providers in each of the affected MSAs, and patients retain complete freedom to choose their physical therapy provider. The Proposed Transaction would not alter the competitive dynamics in either the physical therapy or ASC markets.
A detailed analysis of the vertical relationship between Marlowe Asset Management Rehabilitation and Pinnacle, including facility-level data, referral volume analysis, and an assessment of potential foreclosure effects, is provided in the accompanying White Paper.
F. Reference to Voluntary Submission (White Paper)
A comprehensive voluntary submission providing detailed competitive analysis in support of this request for early termination is being submitted simultaneously with this letter and the Notification. The White Paper includes: (i) a thorough description of the relevant product and geographic markets; (ii) detailed market-by-market assessments of competitive conditions in each of the nine MSAs in which Pinnacle operates; (iii) HHI calculations for each relevant market based on publicly available data supplemented by commercially obtained market data; (iv) an analysis of the limited vertical relationship between Marlowe Asset Management Rehabilitation and Pinnacle; and (v) a discussion of barriers to entry, countervailing buyer power (including the role of managed care payors in negotiating ASC reimbursement rates), and other competitive factors demonstrating the absence of any anticompetitive effects arising from the Proposed Transaction.
We respectfully refer the reviewing staff to the White Paper for additional detail supporting the arguments presented in this letter.
V. Item 4(c) and 4(d) Document Production
The Acquiring Person's Notification and Report Form is accompanied by a total of seven (7) responsive documents produced pursuant to Items 4(c) and 4(d) of the HSR Act's Notification and Report Form. These documents consist of the following:
• Three (3) confidential information memoranda and teaser materials prepared by Pinnacle's financial advisor in connection with the sale process and provided to Ardent Capital during due diligence;
• Two (2) internal investment committee memoranda prepared by Ardent Capital Management LLC in connection with the evaluation and approval of the Proposed Transaction;
• One (1) board presentation prepared for the advisory board of Ardent Capital Partners III LP summarizing the investment thesis and key terms of the Proposed Transaction; and
• One (1) email chain among Ardent Capital investment professionals discussing the competitive landscape for ASC services in the southeastern United States.
The Acquired Person is filing eleven (11) responsive documents under Items 4(c) and 4(d) with its Notification and Report Form through its antitrust counsel, Greenvale Durneval LLP. We understand that the Acquired Person's responsive documents include board materials, strategic planning presentations, and internal management analyses.
We respectfully note that none of the documents produced by either the Acquiring Person or the Acquired Person identify any competitive concerns arising from the Proposed Transaction. To the contrary, the documents consistently reflect the financial and operational rationale for the Transaction — namely, Ardent Capital's interest in acquiring a well-managed, growing ASC platform in a sector that benefits from favorable demographic and reimbursement trends, and Pinnacle's desire to partner with a sponsor that can support continued organic growth and strategic add-on acquisitions.
VI. Contractual Filing Obligations
The EPA contains several provisions relevant to the parties' HSR Act obligations and the timeline for the Proposed Transaction:
• Section 5.4(a) — Filing Obligation and Fee Allocation: Under Section 5.4(a) of the EPA, the parties are obligated to file their respective HSR Act Notification and Report Forms within fifteen (15) business days of the execution date of the EPA (January 31, 2024). The contractual filing deadline is therefore February 22, 2024. Both filings are being submitted today, February 16, 2024, four (4) business days ahead of the contractual deadline. The HSR filing fee is allocated to and paid by Ardent Capital.
• Section 5.4(c) — Efforts Covenant: Under Section 5.4(c) of the EPA, Ardent Capital has covenanted to use "reasonable best efforts" to obtain all regulatory approvals, including HSR Act clearance, as promptly as practicable. This request for early termination is consistent with that covenant.
• Section 6.1(c) — Condition to Closing: Under Section 6.1(c) of the EPA, the expiration or early termination of the applicable waiting period under the HSR Act is a mutual condition to the parties' respective obligations to consummate the closing of the Transaction. Accordingly, the grant of early termination would facilitate the orderly and timely completion of the Transaction, to the mutual benefit of all parties and their respective stakeholders.
VII. Request and Conclusion
For the reasons set forth herein and in the accompanying White Paper, we respectfully request that the Commission and the Division grant early termination of the initial thirty (30) day waiting period under Section 7A(b)(2) of the Clayton Act, 15 U.S.C. § 18a(b)(2). Absent the grant of early termination, the waiting period would expire on March 17, 2024 (thirty calendar days from the date of filing).
In summary, the Proposed Transaction raises no competitive concerns warranting investigation or further review:
• There is no horizontal overlap between Ardent Capital's existing portfolio companies and Pinnacle in any relevant product or geographic market. Ardent Capital does not own, operate, or manage any ambulatory surgical center or physician practice management entity.
• There is no change in market concentration in any relevant market. The Transaction produces a zero-delta HHI result in all nine MSAs in which Pinnacle operates.
• The only potential competitive nexus — a limited vertical relationship between twelve Marlowe Asset Management Rehabilitation physical therapy clinics and certain co-located Pinnacle ASCs — is competitively insignificant, involving de minimis, non-exclusive referral volumes and no foreclosure potential.
The Transaction is a straightforward change of private equity sponsorship that will not alter the competitive landscape in any market. It is precisely the type of transaction for which the Agencies have historically granted early termination.
Undersigned counsel and the filing party are available to respond to any questions the staff may have or to provide any additional information that may be required to facilitate the review of this request. We would welcome the opportunity to discuss the Transaction with reviewing staff at the Agencies' earliest convenience.
Please direct any questions or inquiries regarding the Acquiring Person's filing to:
Howard Bellamy, Partner Calderwood & Harkness LLP 600 Lexington Avenue New York, NY 10022 Telephone: (212) 558-4127
Email: hbellamy@calderwoodharkness.com
Monica Reyes, Associate Calderwood & Harkness LLP 600 Lexington Avenue New York, NY 10022 Telephone: (212) 558-4293
Email: mreyes@calderwoodharkness.com
We thank the Commission and the Division for their consideration of this request.
Respectfully submitted,
CALDERWOOD & HARKNESS LLP
By: ________
Howard Bellamy Partner
600 Lexington Avenue New York, NY 10022 Telephone: (212) 558-4127
Email: hbellamy@calderwoodharkness.com
On behalf of Ardent Capital Partners III LP
cc: (via email)
Julian Desmond, Co-Founder & Managing Partner, Ardent Capital Management LLC
Priya Chandrasekar, Co-Founder & Managing Partner, Ardent Capital Management LLC
David Ostrander, Esq., Whitfield & Crane LLP (transaction counsel to Ardent Capital Partners III LP)
Jonathan Felder, Esq., Greenvale Durneval LLP (antitrust counsel to Pinnacle Health Systems, Inc.)
Catherine "Kate" Yardley, Esq., Fendowell Thornton LLP (transaction counsel to Pinnacle Health Systems, Inc. and Veltrano Equity Holdings LLC)

CALDERWOOD & HARKNESS LLP Attorneys at Law

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