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Excerpt from our One Page Annotated Wall Street Journal Summary (receive it by email every morning by signing up here):

HCA Is in Talks On Buyout Offer Worth $21 Billion

  • Summary: Hospital operator HCA Inc. is close to a deal to sell itself to a group of private equity investors for approximately $21 billion, with investors taking on $10.6 billion in HCA debt, making this one of the largest LBOs in history. The buyers in the 'on-again-off-again' transaction are Bain Capital, Kohlberg, Kravis Roberts and Merrill Lynch, and are reportedly offering $51 a share, a slight premium to the current stock price of $47.87. The company's management and founding family, the Frists (current 4.4% owners) would also take part. It comes at a time when uninsured patients, Medicare restrictions and higher expenses pressure the industry in general, and HCA in particular. But an aging population and the concomitant rise in health-care spend, plus hope that the government will eventually assume more of the cost for the uninsured, give reason for hope for the new investors. Senate Majority Leader Bill Frist, member of the founding family, sold his HCA shares in mid-2005 as the stock hit a 52-week high - a sale that's under investigation by the SEC, but which Frist claims was done to avoid any appearance of conflict of interest. An HCA sale could spur further buyouts in the hospital industry.
  • Comment on related stocks/ETFs: It's altogether possible that HCA stock will continue to climb as competing offers come in from the likes of Blackstone or Goldman Sachs. Wall Street has been awaiting a private equity deal of this magnitude, and it could set the ball in motion for more. Keep your eyes on HCA peers Health Management (HMA), Community Health (CYH), Triad (TRI), and Tenet (THC).
Source: HCA In Advanced Talks on Buyout