Hospital Industry Stats Bode Well for HCA Holdings IPO

Includes: CYH, HCA, HMA, THC, UHS
by: IPOdesktop

HCA Holdings (NYSE:HCA) is scheduling a $3.5 billion IPO for Thursday, March 10, 2011 with a market capitilization of $14.7 billion at $28.50, the price range mid-point. HCA is based in Nashville, TN.

The managers and joint managers are BofA Merrill Lynch (NYSE:BAC), Citi (NYSE:C), J.P. Morgan (NYSE:JPM), Barclays Capital (NYSE:BCS), Credit Suisse (NYSE:CS), Deutsche Bank Securities (NYSE:DB), Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS), and Wells Fargo Securities (NYSE:WFC).

The co-managers are Credit Agricole, Mizuho Securities, RBC Capital Markets, RBS (NYSE:RBS), SMBC Nikko, SunTrust Robinson Humphrey, Avondale Partners, Baird, Cowen (NASDAQ:COWN), CRT Capital Group, Lazard Capital Markets (NYSE:LAZ), Leerink Swann, Morgan Keegan, Oppenheimer (NYSE:OPY), Raymond James (NYSE:RJF), and Susquehanna Financial Group (NASDAQ:SUSQ).

HCA is the largest non-governmental hospital operator in the U.S. and a leading comprehensive, integrated provider of health care and related services

-- Hospital stocks have been in an upswing for the past six months. The four most commonly followed hospital stocks have increased on average 36% in the last six months. In particular the gains are as follows: Community Health Sys (NYSE:CYH) +41%; Health Mgt Assc (NYSE:HMA) -2%; Tenet Healthcare (NYSE:THC) 72%; and Universal Health Serv (NYSE:UHS) 32%.

And on Friday, February 25, 2011 the group shot up 3.3%: Individual gains were: Community Health Sys (CYH) +6%; Health Mgt Assc (HMA) +3%; Tenet Healthcare (THC) +1%; and Universal Health Serv (UHS) +3%

On February 25, 2011, shares of Community Health Systems Inc. (CYH) jumped by more than 6% after the hospital operator reported better-than-expected earnings for the fourth quarter late Thursday; this is a positive for HCA.

Also, January 14, 2011, Community Health Systems Inc., pressing a $3.3-billion hostile takeover bid for rival hospital operator Tenet Healthcare Corp., said it will nominate a full slate of 10 directors to Tenet’s board. This is an example of further industry consolidation.

According to the Medical Group Management Association by next year 2/3 of doctors will be salaried employees of larger institutions, such as HCA. Six years ago doctors owned more than 2/3 of U.S. medical practices. Doctors and hospitals have decided they need massive size to survive.

LEVERAGED BUYOUT -- On November 17, 2006, HCA Inc. was acquired by a private investor group comprised of affiliates of or funds sponsored by Bain Capital, KKR, MLGPE (now BAML Capital Partners), Citigroup Inc., Bank of America Corporation and HCA founder Dr. Thomas F. Frist, Jr., and by members of management and certain other investors.

DIVIDENDS -- During 2010 HCA drained its balance sheet by $4.351 billion cash to pay dividends to stockholders. No future dividends expected on the common stock

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

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