TPG in $945m surgery center deal

Some management team members of HealthSouth Corporation, the parent company of the surgery division to be acquired, will join the newly formed stand-alone surgery company.

Fort Worth, Texas-based global private equity firm Texas Pacific Group has agreed to buy the surgery division of HealthSouth Corporation, a Birmingham, Alabama-based healthcare service provider, for about $945 million (€712 million). The sale will result in the formation of a stand-alone surgery company.

The deal is expected to close in the third quarter of 2007.

“The proceeds from this transaction will be used to pay down a significant portion of our long-term debt, thereby strengthening our balance sheet and positioning us to grow our core business,” Jay Grinney, HealthSouth’s president and chief executive officer, said in a statement.

Members of HealthSouth’s senior management team, including chief operating officer Mike Snow and surgery division president Joe Clark, will leave the company to join the newly formed surgery company. The new company’s headquarters are expected to remain in Birmingham. HealthSouth will provide the surgery company with corporate support services for an interim period, the statement said.

HealthSouth’s surgery division consists of about 140 outpatient surgery centers and three surgical hospitals in 35 states. Most of the centers are located in California, Texas, Florida, North Carolina and Alabama. HealthSouth trades on the New York Stock Exchange under the ticker symbol HLS.

Fifteen-year-old Texas Pacific Group strengthened its healthcare division last year when it hired four former senior executives of WellPoint, a publicly traded commercial health benefits company in the US, to be senior advisors to the firm. Those hired included Leonard Schaffer, the former chief executive officer of WellPoint, as well as Thomas Geiser, Robert Glaser and William Palmer.

This deal follows other surgery-related transactions that have taken place during the past few months. UNCN Acquisition Corp, an affiliate of private equity firm Welsh, Carson, Anderson & Stowe, agreed to merge with United Surgical Partners International, an operator of surgery centers in the US and Europe, in a deal worth about $1.8 billion in January. JPMorgan Partners spinout CCMP Capital Advisors and Goldman Sachsprivate equity division GS Capital Partners jointly invested about $6 billion in Triad Hospitals, a US hospital and surgery center operator, the following month.