HCA agrees to buyout deal during business downturn

NASHVILLE, Tenn. - The board of HCA Inc. is recommending the nation's largest for-profit hospital operator accept a $21.3 billion deal to take the company private in one of the largest leveraged buyouts ever.

The deal, which would involve the assumption of $11.7 billion in debt, comes while HCA is struggling with sliding earnings, slow growth and escalating costs for uninsured patients.

The buyout would take the Nashville-based company private for the second time since its initial public offering in 1969, and it would give HCA time to turn around its market performance.

''This gives a company like HCA the ability to duck in the hole, so to speak, in a difficult time for industry fundamentals,'' said Darren Lehrich, a managing director at Deutsche Bank.

''It takes a little bit of the quarter-to-quarter pressure off the management team and has a much longer term view in this environment, where we've witnessed soft volumes and deteriorating bad-debt trends for the better part of three years,'' he said.

Shareholders of the company, which was founded by the family of Senate Majority Leader Bill Frist, would receive $51 in cash for each share of common stock under the deal announced Monday.

The deal would present an 18 percent premium to HCA's closing share price last Tuesday, the last major trading day before media reports about a potential buyout of the company, and a 6.5 percent premium to its closing price on Friday.

Shares of HCA rose $1.61, or 3.4 percent, to close at $49.48 on the New York Stock Exchange, and have traded in the $41.80 to $52.74 range over the last 52 weeks.

Barring a better offer, HCA expects to complete the deal in the fourth quarter.

The buyer is an investor group made up of Bain Capital, Kohlberg Kravis Roberts & Co., and Merrill Lynch Global Private Equity, none of which immediately returned phone calls seeking comment.

Dr. Thomas Frist Jr., 67, the senator's brother and a board member of HCA, is joining with the private equity groups to acquire the company he founded with his father in the 1960s. Other members of senior management at HCA, including Chairman and Chief Executive Jack Bovender, 60, have agreed to reinvest part of their HCA equity into the new entity.

''This transaction will position the company to continue its tradition of high-quality service provided with genuine caring,'' Thomas Frist said in a statement. ''In addition, the transaction will position the company and its employees for sustained future success.''

HCA on Monday reported second-quarter earnings of $295 million, or 72 cents per share, down 27 percent from $405 million, or 90 cents per share, in the same year-ago period.