A consortium of of Bain Capital, Kohlberg Kravis Roberts and Merrill Lynch Global Private Equity, three US buyout groups, has succeeded in its attempt to buy HCA, a US hospital chain, in a $33 billion (€26 billion) record deal.
The deal includes the assumption of about $11.7 billion in debt, making it the largest leveraged buyout in history, finally eclipsing KKR’s 1989 buyout of RJR Nabisco for $31.8bn.
The news comes after reports last week that the buyout managers balked at HCA’s request for a 10 percent increase in the offer. KKR’s team will now buy the Tennessee-based hospital chain, which is the largest in the US, for $51 per share, a premium of about 6.5 percent over its closing stock price of $47.87 on Friday, giving it a market capitalisation of $21bn.
Each of the firms is putting a $1.5 billion of equity into the deal with a similar level of investment coming from the family of US Senate Majority Leader Bill Frist.
Senator Frist’s brother Thomas Frist Jr. and his father Thomas Frist Sr. founded the company in the 1960’s. The company owns and operates 176 hospitals and 92 free-standing surgery centers in the United States, the United Kingdom and Switzerland.
The deal comes at the same time that HCA is reporting a 27 percent drop in second-quarter profit. The hospital sector as a whole is being hurt by ever-increasing unpaid medical bills and greater competition from doctor practices. The company reported 2005 revenue of $24.5 billion.
This is not the first time the company has gone private. In 1989 the company was purchased in a $5.1 billion leveraged buyout at a time when the company was concerned about a hostile takeover. HCA went back on the public market in 1992.
Merrill Lynch & Co. acted as lead M&A advisor to the private equity consortium, along with Banc of America Securities, Citigroup Global Markets, and JPMorgan.
Under the terms of the merger agreement, HCA may solicit superior proposals from third parties during the next 50 days.
Separately KKR has also entered into exclusive negotiations for PagesJaunes, the directories business of France Telecom, offering €22 a share for the national carrier’s 54% stake worth €3.3bn. It will increase the offer to €22.6 a share in the event it reaches a 95% stake in the business.