HCA Buyout Largest On Record

HCA’s shares rose this afternoon after news that a private buyout of the company is the largest on record.

Nashville-based HCA announced this morning that it has agreed to a buyout with investors valued at $33 billion. The buyout is the largest on record, surpassing RJR Nabisco’s buyout of $31.3 billion in 1989.

This investor group includes Bain Capital, Kohlberg, Kravis, Roberts & Company, Merrill Lynch, and HCA co-founder Dr. Thomas Frist, Jr., brother of Senate Majority Leader Bill Frist. The group will acquire HCA for $21 billion, plus assume the company’s $11.7 billion of debt, giving the transaction a value of $33 billion.

This is the second time that HCA will go from being publicly traded to a private company. In the late 1980s, HCA was acquired through a private leveraged buyout, only to go public again in 1992.

Jon Lehman is the Associate Dean of Healthcare for Vanderbilt’s Owen Graduate School. He expects this investor group has a similar strategy.

“You may see them selling off some additional properties to reduce the debt load, I don’t know if that’s in their plans, but that is what they did the last time they did this kind of transaction. Then when they get it to the point where they’re able to get that debt paid down and so forth, they may choose to keep it private. It’s likely that they will want to take it public again, and that will usually be a transaction where these folks who are putting in now will want to get liquidity on their investment.”

The deal is expected to close some time in the fourth quarter of this year.