- The Washington Times - Monday, July 24, 2006

NASHVILLE, Tenn. (AP) — 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 in history.

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 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 yesterday.

The deal presents 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 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 during the past 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 Officer 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,” Dr. Frist said. “In addition, the transaction will position the company and its employees for sustained future success.”

Mr. Frist, a Tennessee Republican, who never worked for the company, made headlines last year for selling all his HCA stock. The sale was made in June 2005 when the stock was at its 52-week high and just before its price sharply dropped, prompting the Securities and Exchange Commission and the U.S. attorney in the southern district of New York to investigate whether he received insider information from his family.

The senator’s wife and three sons also sold HCA stock from their trusts around the same time.

Neither investigation has been resolved.

A doctor himself, Mr. Frist has denied any wrongdoing. He said last year he sold the stock to avoid appearing like he had a conflict of interest because he was working on health care policy in the Senate. His stock was in a few blind trusts, the largest of which provided him income last year of more than $5 million, according to his financial disclosures.

A spokeswoman for Mr. Frist, who is retiring this year and is thought to be interested in seeking the presidency in 2008, yesterday declined to comment on the HCA sale.

“Senator Frist has no HCA stock and therefore has no comment,” said spokeswoman Carolyn Weyforth.

• Staff writer Christina Bellantoni contributed to this report from Washington.

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