Prospect Medical Holdings Inc. on Monday said it agreed to be bought by Leonard Green & Partners, a private equity firm, and members of its own management team in a deal valued at $205 million.

The West Los Angeles managed care and physician services provider, which operates five hospitals and primarily serves Medicare patients, said shareholders will be paid $8.50 a share, a 39 percent premium to the company’s closing price on Friday.

The company said that insiders have committed their 10.4 million shares, nearly 50 percent of the company's outstanding shares, in favor of the deal. About 4.2 million of those shares are to be exchanged for cash and the remainder to be exchanged for stock of the acquiring entity, which will be set up by Leonard Green, which also is based in West Los Angeles.

Prospect’s directors, acting on the unanimous recommendation of a special committee of independent directors, has approved the merger agreement and recommended that Prospect stockholders adopt the merger agreement.

Under the agreement, Prospect has the right to seek competing acquisition proposals during the 40-day period that ends Sept. 25. At least five law firms have announced investigations into whether minority shareholders are being shortchanged in the deal.

Leonard Green is better known for its investments in large retail chains, including Sports Authority, Whole Foods, and The Container Store. In the health sector it has stakes in the upscale Equinox fitness club chain and IMS Health Inc., which provides market data and consulting services to pharmaceutical companies. It was an investor in Los Angeles veterinary hospital chain VCA Antech Inc. prior to the company going public.

Shares closed up $2.42, or 39.5 percent, to $8.54 on the Nasdaq.

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