Is Now the Time to Buy Select Medical (SEM) Ahead of a Potential Takeout?

The recent non-binding take-private proposal for Select Medical Holdings (NYSE: SEM) by its Executive Chairman, Robert A. Ortenzio, has ignited significant investor interest. Offering to acquire all outstanding shares at $16.00 to $16.20 per share, the bid represents a potential premium of up to 15.6% over the stock's previous closing price of $15.74 according to Nasdaq reporting. With the board of directors now evaluating the offer and the stock surging 12.35% post-announcement, investors are left weighing the strategic and financial implications of this development.

The Takeout Proposal: Structure and Uncertainty

Ortenzio's proposal, disclosed via a Schedule 13D filing on November 24, 2025 according to PR Newswire, is entirely cash-based, a structure that could minimize financing risks compared to leveraged buyouts. However, the non-binding nature of the offer introduces uncertainty. The board has emphasized it is "carefully evaluating" the proposal with advisors but has not committed to any specific outcome. This ambiguity underscores the need for caution, as the deal's completion remains contingent on due diligence, financing, and shareholder approval.

Financial Health and Growth Drivers

Select Medical's recent financial performance adds nuance to the takeout debate. The company reported third-quarter 2025 revenue of $1.36 billion, a 7% year-over-year increase, driven by facility expansions and favorable regulatory updates. Its 2025 guidance-revenue of $5.3–$5.5 billion and EPS of $1.14–$1.24-reflects confidence in navigating challenges like Medicare reimbursement adjustments. Additionally, the extension of its $1.0 billion stock repurchase program through 2027 signals management's belief in the stock's intrinsic value.

The company's asset base, including 105 critical illness recovery hospitals and 1,922 outpatient clinics, positions it to capitalize on long-term demand for post-acute care. Analysts note that regulatory stability, such as the delayed CMS transmittal rule, could further bolster margins.

### Market Reaction and Risks
The stock's 12.35% surge following the proposal announcement suggests market optimism about the bid's potential. However, premarket volatility-driven by concerns over Medicare reimbursement risks highlights lingering uncertainties. While the offer price implies a premium, it also reflects a discount to the company's intrinsic value if its growth trajectory holds. For instance, at $16.20 per share, the valuation assumes a static business, ignoring the potential of its expansion plans.

Critically, the board's evaluation timeline remains opaque. With no public deadline for a decision, investors must balance the allure of a near-term premium against the risk of missing out on future growth.

Strategic Considerations: Buyout vs. Independence

A key question is whether the proposed buyout aligns with Select Medical's strategic potential. Taking the company private could streamline decision-making and reduce regulatory scrutiny, but it might also limit access to capital markets and stifle innovation. Conversely, maintaining independence allows the company to pursue its capital allocation strategy, including facility expansions and buybacks, which have historically delivered value.

The board's commitment to acting in shareholders' best interests suggests a thorough evaluation of all options, including exploring alternative bids or rejecting the offer outright. This process could extend for months, adding to the stock's volatility.

Conclusion: A Calculated Opportunity

For investors, the current juncture presents a calculated opportunity. The $16.00–$16.20 bid offers a clear floor price, particularly for those who believe the board will prioritize a quick resolution. However, the stock's recent performance-driven by strong fundamentals and a robust buyback program-suggests that patience could also yield rewards.

Those comfortable with short-term volatility and the possibility of a prolonged evaluation period may find the current price attractive. Conversely, investors who prioritize certainty might consider hedging their positions or waiting for further clarity from the board. Ultimately, the decision hinges on whether the proposed premium outweighs the company's potential to outperform as an independent entity.