The Blackstone Group, which earlier this month closed on the world’s largest buyout fund, is exploring the possibility of submitting a rival bid for US hospital operator HCA, a source familiar with the matter said. Earlier this week a consortium consisting of Bain Capital, Kohlberg Kravis Roberts, Merrill Lynch and HCA co-founder Thomas Frist Jr. succeeded in its attempts to acquire HCA for $21.3 billion (€17 billion), plus $11.7 billion of assumed debt.
Under the terms of the merger agreement, HCA may solicit superior proposals from third parties during the next 48 days. Blackstone was reported today to be eyeing a competing offer.
Although the source confirmed that Blackstone has been looking at HCA for a few weeks, they said the firm has not yet decided how it will proceed. The source added that a rival bid is unlikely because of the $300 million break fee that HCA would incur if it were to accept a competing offer, as well as the lack of support from the Frist family, which founded the company in the 1960’s.
The purchase of HCA by the current bidders would be the largest leveraged buyout in history. The chain of 176 hospitals and 82 surgery centres operates mostly in the Southern United States, but also has facilities in the United Kingdom and Switzerland.
Although the deal comes at the same time that HCA is reporting a 27 percent drop in second-quarter profit, the company generates significant cash that could be used to repay debt.
Some have speculated that Blackstone may be positioning itself to join the current investor group, as any offer surpassing the current bid would require a significant partnership with other firms. In addition, an offer from Blackstone would need to be much higher than the current bid, to compensate for not having the backing of Thomas Frist Jr., who is the brother of US Senate Majority Leader Bill Frist.