HCA Holdings rose about 4.0% in its first day of trading. This was very impressive, considering the Dow Jones Industrial Average fell 228 points in the same day (3/10/11). The Dow fell in response to increasing jobless claims, a larger U.S. trade deficit, a larger Chinese trade deficit, and a lower GDP revision in Japan on 3/9/11. Luckily, HCA was unaffected, which reflects both the strength of the company and its balance sheet. HCA represents such a large share of the U.S. hospital industry, that institutional money managers probably could not refuse to purchase the security for their portfolios. HCA’s public competitors include CYH – Community Health Systems and THC – Tenet Healthcare Corp.
According to Bloomberg, “HCA Holdings Inc., the largest publicly traded hospital chain in the U.S., rose 3.9 percent on its first day of trading after completing a record $3.79 billion, private equity-backed initial public offering.
Nashville, Tennessee-based HCA increased $1.15 to $31.15 at 1:16 p.m. in New York Stock Exchange composite trading, even as rising U.S. jobless claims drove the Dow Jones Industrial Index down 137 points. HCA’s offering sold more than 126 million shares at $30 each, the top of the proposed price range, the company said yesterday in a statement.
The IPO’s performance on a day when the market is falling reflects both the strength of HCA’s balance sheet and the momentum in favor of private equity-backed deals being brought to market, said Josef Schuster, founder of IPOX Schuster LLC in Chicago. There’s “plenty of liquidity available” for large U.S. deals like this one, he said.
“The deal underlines the level of confidence among large- cap managers about these type of private equity deals and the for-profit hospital space,” Schuster said in a telephone interview today. “Even with no dividend, investors like the level of cash with this company.”
For-profit hospitals will benefit as last year’s U.S. health overhaul forces consolidation and cost cutting that may leave non-profit competitors at a disadvantage, said Les Funtleyder, an analyst at Miller Tabak & Co. in New York. Investors are also expecting HCA to be added to stock-trading indexes and buying ahead of that, he said.
“People look at HCA as a blue-chip name in a space they want to get involved in,” said Mark Bronzo, who helps manage $25 billion at Security Global Investors in Irvington, New York, in a telephone interview today. “There just aren’t a lot of names to choose from there.”
For-profit hospital chains such as HCA depend more on commercial payers and less on government beneficiaries than do nonprofits, which have already seen their revenue reduced by government cutbacks, particularly in Medicaid.
HCA competitors among for-profit hospitals include Community Health Systems Inc. (CYH) in Franklin, Tennessee, and Tenet Healthcare Corp. (THC) in Dallas.
HCA’s offering exceeded the Feb. 10 initial stock sale by Houston-based energy-pipeline company Kinder Morgan Inc., which raised $3.3 billion. Private equity-backed IPOs in the U.S. have gotten a boost this year as the Standard & Poor’s 500 Index rallied to the highest level since June 2008, raising investors’ interest in companies acquired through debt-fueled takeovers.
“We have a market that’s more willing to take on risk,” said Alan Gayle, senior investment strategist at RidgeWorth Capital Management in Richmond, Virginia, which oversees $52.5 billion. “This is a much better, much warmer climate for this type of offering.”
The underwriters may exercise an overallotment option to buy as many as 18.9 million additional shares within 30 days, the company said. HCA sold 87.7 million shares, while existing investors sold 38.5 million.
Companies owned by private equity investors have accounted for 80 percent of the funds raised in U.S. IPOs since the beginning of the year, and the shares have gained 10 percent on average through yesterday, compared with 4.8 percent for companies not owned by leveraged buyout firms, Bloomberg data show.
KKR and Bain
KKR & Co., Bain Capital LLC, Bank of America Corp. (BAC) and other owners invested about $5 billion in equity in the $33 billion takeover of HCA. Including debt, it was the largest leveraged buyout at the time.
In acquiring HCA, KKR and Bain chose a company with steady cash flow and a business that’s protected to a large extent from swings in the economy. Cash flow from operations was $3.16 billion in the year before the 2006 buyout, according to data compiled by Bloomberg. As of Dec. 31, 2010, that number was little changed at $3.09 billion.
The company offered as many as 124 million shares at $27 to $30 apiece, according to a filing with the U.S. Securities and Exchange Commission. Charlotte, North Carolina-based Bank of America and Citigroup Inc. and JPMorgan Chase & Co. of New York led HCA’s sale. HCA said it will use the proceeds to repay debt.”
The following links will take you to previous articles we wrote on HCA:
David Bonderman, the founder of TPG, claims that large deals are back, and they are back to stay. Fueled by cheap credit and impatient investors, mega LBOs will return, and according to him, TPG will be at the forefront. TPG has not been shy of these deals in the past, leading the $44 billion takeover of TXU with Goldman Sachs and KKR in 2007. Surprisingly, investor memories are short, and the same leverage multiples and weak capital structures we saw in 2006 are emerging today in the private equity industry. As takeover multiples rise, so will leverage. And funny thing is, banks are willing to provide it more than ever.
“Larger deals are back,” Mr. Bonderman said Thursday at the SuperReturn conference in Berlin. “It is as I said before absolutely possible to do a 10-to-15-billion-dollar deal now. It might not be one you want to do. It might not be one you should do. But the capital is available.”
Recent private equity deals have been valued at $5 billion or less, a far cry from those of the 2006-2007 buyout boom. Indeed, in 2007 TPG teamed up with KKR and Goldman Sachs to buy the energy company TXU for $44 billion.
But money for private equity deals dried up in the financial crisis and the recovery so far has brought only smaller deals.
Among those deals is the $3 billion leveraged buyout of the preppy retailer J. Crew by TPG and Leonard Green & Partners, a deal that was approved by the company’s shareholders this week.
Along with larger deals, Mr. Bonderman and other private equity executives at the SuperReturn conference were all abuzz about the potential of emerging markets.
Mr. Bonderman called emerging markets the “flavor of the month” and predicted that initial public offerings in emerging markets would represent an even larger proportion of the deals in years to come.
“Interesting enough, if you survey folks like all of us in this room, everybody sees emerging markets growing just about as fast as mature markets in the deal business, which of course has never been the case before now,” Mr. Bonderman said, adding that the upside potential for deals remained high.
Growth in emerging markets is being fueled by China’s booming economy, which could even be on the verge of a bubble, as well as broader trends, including the rise of the middle class in those regions, Mr. Bonderman said.
“Even Brazil is a China story,” Mr. Bonderman said, adding that the emerging middle class would add trillions of dollars to emerging economies, particularly on the consumption side. This should lead to a “huge rebalancing of how the world sees itself,” he said.
Mr. Bonderman was asked about TPG’s recent exit from the Turkish spirits company Mey Icki , which TPG acquired in 2006 for about $800 million and sold in February for $2.1 billion.
He responded: “We thought it was a good opportunity, and it turned out to be. We would have taken it public had Diageo not shown up. As in any other place, if you can sell the whole business, you’re better off than taking it public, where you have to dribble it out even though you might get a nominally higher value. We like Turkey as a place to invest and we’ll be back.”
On the sovereign crises, such as the one in Greece, Mr. Bonderman said: “When governments are selling, you should be buying. And when governments are defaulting, we should look at that as an opportunity. Prices are always lower when the troops are in the street. A good default, like Portugal or Greece, would be very good for the private equity business. Might not be so good for the republic, but it would be good for us.”
HCA Holdings, the large hospital operator in the world, confirmed that it had set a preliminary price range for its initial public offering of $27 to $30 a share last month. The company was taken private in 2006 for about $30 billion, with an equity check that was only 15% of its purchase price! Last year, HCA’s $4.3 billion dividend recapitalization itself made many parties in the deal whole on their initial investment. The IPO is gravy, icing on the cake. And to top it all off, this had been done with the hospital operator before: “The company had been under private-equity ownership before, completing a $5.1 billion leveraged buyout in 1989. When it went public again in 1992, it handed its backers, including units of Goldman Sachs Group Inc. and JPMorgan Chase & Co., a more-than- eightfold gain, BusinessWeek magazine reported at the time.”
According to BusinessWeek, after a tepid turnout in 2010, there has been a modest uptick in buyout-backed offerings this year, with several exceeding expectations. Among the recent I.P.O.’s are Nielsen Holdings, Kinder Morgan and Bank United. HCA is currently pitching its offering to investors.
A private equity consortium, including Kohlberg Kravis Roberts, Bain Capital and Merrill Lynch, acquired HCA in 2006, loading the company up with debt. HCA, in its filing, said it planned to use proceeds from its offering to pay off some of its debt.
What a difference 10 months have made for HCA Inc. and its private-equity owners, KKR & Co., Bain Capital LLC and Bank of America Corp.
When the hospital operator, which went private in a record leveraged buyout in 2006, filed in May to go public, U.S. initial offerings were stumbling, with deals in the first four months raising an average of 13 percent less than sought. Rather than press ahead, the owners took on more debt to pay themselves a $2 billion dividend in November, in a transaction known as a dividend recapitalization.
This month, HCA’s owners are betting that stock markets have recovered enough for investors to pick up the shares, even with the additional debt. If they’re right, they may triple their initial investment in what would be the largest private- equity backed initial public offering on record.
“This has been a classic case of buy low, sell high from the beginning,” said J. Andrew Cowherd, managing director in the health-care group of Peter J. Solomon Co., a New York-based investment bank. “Private-equity buyers have timed capital markets perfectly on this deal.”
The offering, if successful, underscores the crucial role played by the capital markets in leveraged buyouts, at times eclipsing the impact of operational changes private-equity firms make at their companies. A surge in demand for stocks and junk- bonds, fueled by asset purchases of the Federal Reserve that sent investors searching for yield, have helped KKR and Bain reap profits from HCA, even as the company remains burdened with $28.2 billion in debt and slowing revenue growth.
KKR, Bain, Bank of America and other owners invested about $5 billion in equity in the $33 billion takeover of HCA, which including debt was the largest leveraged buyout at the time. The backers, who took out $4.3 billion in dividends from HCA last year as the high-yield market soared, stand to get more than $1 billion from the IPO and will retain a stake in HCA valued at about $11 billion.
In acquiring Nashville, Tennessee-based HCA, KKR and Bain chose a company with steady cash flow and a business that’s protected from swings in the economy. Cash flow from operations was $3.16 billion in the year before the 2006 buyout, according to data compiled by Bloomberg. As of Dec. 31, 2010, that number was little changed at $3.09 billion.
The company had been under private-equity ownership before, completing a $5.1 billion leveraged buyout in 1989. When it went public again in 1992, it handed its backers, including units of Goldman Sachs Group Inc. and JPMorgan Chase & Co., a more-than- eightfold gain, BusinessWeek magazine reported at the time.
Unlike some other buyouts of the boom years that had less predictable income streams, HCA has reported revenue growth of between 5 percent and 6 percent every year it was private, except in 2010, when growth slowed to 2.1 percent. Net income has increased 17 percent since the end of 2006.
NXP Semiconductors NV, another 2006 buyout involving KKR and Bain, had combined losses of $5.8 billion between the takeover and its IPO in August. NXP, which sold just 14 percent of its shares, had to cut the offering price, leaving investors with a 21 percent paper loss as of Dec. 31. The stock has more than doubled since the IPO.
HCA, the biggest for-profit hospital chain in the U.S., attributes gains in income to cost-cutting measures and initiatives to improve services for patients. The company sold some hospitals after the buyout and made “significant investments” in expanding service lines, as well as in information technology, HCA said in a regulatory filing.
“HCA was already one of the better operators when it was taken private so it was hard to see how much cost could be driven out of the business,” Dean Diaz, senior credit officer at Moody’s Investors Service in New York, said in a telephone interview. “But they are very good at what they do and are above where we would have expected on Ebitda growth.”
Some of the improvements in earnings have come from “aggressive changes in billing and bad debt expense reserves,” Vicki Bryan, an analyst at New York-based corporate-bond research firm Gimme Credit LLC, said in a Feb. 22 report.
Provisions for doubtful accounts dropped 19 percent last year, to $2.65 billion. Capital spending, or money invested in the company, declined to about 4 percent of revenue last year from 7 percent in 2006. The company hasn’t used its cash to bring down the debt load, which is about the same as it was at the time of the takeover.
That debt will contribute to a negative shareholder equity, a measure of what stockholders will be left with if all assets were sold and debts were paid, of $8.6 billion, according to Bryan. Excluding intangible assets, new investors buying the stock would own a negative $51 per share, she said.
‘Funding the LBO’
“Today’s HCA stock buyers are still funding the 2006 LBO, which enriched many of the same equity owners for the second time, plus the massive dividends and management fees paid to those equity investors who will remain very much in control,” Bryan wrote in the report.
While it’s not unusual for companies that exit LBOs to have more debt than assets, it means they will have to use cash flow to reduce debt rather than pay out dividends, limiting returns for shareholders. HCA’s share price doubled in the 14-year period between its 1992 IPO and the 2006 buyout, not including the impact of stock splits.
Ed Fishbough, an HCA spokesman, declined to comment, as did officials for New York-based KKR, Bain in Boston, and Bank of America in Charlotte, North Carolina.
Even so, investors may pick up the stock after U.S. equity markets rallied to the highest levels since June 2008. So far this year, eight companies backed by private-equity or venture- capital firms have raised $5.9 billion in initial public offerings, five times the amount that such companies raised last year, according to data compiled by Bloomberg.
At the midpoint of the price range of $27 to $30, the IPO would value the company at $14.7 billion. Based on metrics such as earnings and debt, that valuation would give HCA a “slight premium” to rivals such as Community Health Systems Inc. and Tenet Healthcare Corp., according to a Feb. 22 report from CreditSights Inc.
Community Health Systems, currently the biggest publicly traded hospital operator, in December bid $3.3 billion to buy Tenet in Dallas. If the takeover is successful, the combined company with about $22.2 billion in revenue as of Dec. 31, 2010 will still be smaller than HCA.
With as much as $4.28 billion in stock being sold, the HCA offering is poised to break the record set by Kinder Morgan Inc., the buyout-backed company that last month raised $2.9 billion in an IPO.
Shareholders will also have to weigh the impact of government spending cuts and changes to hospital payment schedules prompted by the 2010 U.S. health law and rules from the Centers for Medicare and Medicaid, which administer the federal programs.
Baltimore-based CMS has been pushing to bundle payments to doctors and hospitals, giving them a set amount for a procedure that has to be split among providers. The agency also plans to penalize providers if patients acquire infections while in treatment or fare badly after stays. Too many readmissions, once regarded as more revenue, may now result in lower payment rates.
The federal health-care law will extend health insurance to 32 million more Americans and may prompt some employers to drop company-sponsored health benefits in favor of sending employees to state insurance exchanges the new law creates. While the newly insured may mean less bad debt for hospitals, fewer private sector-paid benefits may mean lower revenue for for- profits like HCA, because commercial payers and employers tend to pay the highest rates to providers.
“Hospitals are going to have to learn how to be productive and profitable on a Medicare rate schedule,” said R. Lawrence Van Horn, who teaches at the Owen Graduate School of Management at Vanderbilt University in Nashville. Medicare and Medicaid pay less for procedures and treatment than employers and commercial insurers, which are “traditionally the most generous payers,” he said.
HCA said in its filing that it can’t predict the impact of the changes on the company.
For-profit hospitals like HCA depend more on commercial payers and less on government beneficiaries than do nonprofits, which have already seen their revenue reduced by government cutbacks, particularly in Medicaid. Chains like HCA, with their access to capital, may be able to take advantage of weakness among nonprofits to consolidate the industry further, Van Horn said.
Megan Neuburger, an analyst at Fitch Ratings in New York, said the biggest impact of the health-care reform won’t be felt until 2014, and the market recovery will play a more important role for now in determining HCA’s success.
“In the short term, the pace and progress of economic recovery will probably be more influential to the industry’s financial and operating trends than health-care reform,” Neuburger said in an interview.
For KKR and Bain, the timing of the IPO is crucial also because their clients want to see whether buyouts made just before the credit crisis can be profitable, before they commit capital to new funds. KKR is seeking to raise its 11th North American-focused buyout fund this year.
Buyout firms have been able to return some money to investors through dividend recapitalizations, as near-zero interest rates have spurred a demand for junk bonds. Borrowers sold $47 billion of debt last year, or 9 percent of offerings, to pay owners, compared with $11.7 billion in 2008 and 2009, according to Standard & Poor’s Leveraged Commentary and Data.
Investors in Bain’s 2006 fund have received $1.6 billion in distributions so far, or about 20 percent of the $8 billion deployed. HCA’s dividends recapitalizations accounted for about $302 million of the total Bain paid out to the fund’s clients, according to an investor in the fund. The fund has generated an average annual loss of 6.4 percent, according to another person familiar with the fund.
“Investors committed an unprecedented amount of money over a short time period,” said Jeremie Le Febvre, the Paris-based global head of origination for Triago, which helps private- equity firms raise money. “Investors most likely won’t be as generous a second time, or even have the means to double down on a firm, as reputable as it may be, without first seeing money flowing back into their pockets.”
–With assistance from Lee Spears in New York and Christian Baumgaertel in 東京. Editors: Christian Baumgaertel, Larry Edelman
Toys R Us was an Opco-Propco deal done by KKR, Bain, and Vornado in 2005 for $6.5+ billion. The company was one of the largest owners of real estate in the United States, other than McDonalds. Since the toy business was not performing well and Babies R Us could not yet produce enough EBITDA to drive the company’s public valuation, these three players found an opportunity to take advantage of its real estate holdings (good call, right?). Unfortunately, the company now has $5.5 billion in debt on its balance sheet and only has 2.3% growth in sales, a $35mm loss in earnings, down from $95mm in profit last year, and a 25% increase in expenses year over year (SA). Cash used in operations also increased from $800mm to $1.2 billion over that time period. Sounds like a great time to IPO, right? Well, the sponsors in this deal seem to think so. With equity markets topping, they are trying their hardest to take advantage of foolish retail investors. Invest at your own risk:
“(Reuters) – Toys R Us Inc TOY.UL is looking to raise around $800 million in an initial public offering in April, though a final decision has not been reached, the New York Post said on Saturday.
The New Jersey-based retailer, which operates stores under its namesake brand and the Babies R Us and FAO Schwarz labels, had put off plans for an IPO in 2010.
“Toys R Us took more market share from competitors last year than they have in the past 20 years,” said one source the Post described as close to the company. “But I don’t think they were satisfied with how they did on the profit level.”
Toys R Us spokeswoman Kathleen Waugh said the company could not comment on the matter.
For December 2010, Toys R Us reported a 5.4 percent total sales rise at its U.S. unit as it lured holiday shoppers away from No. 1 toy retailer Wal-Mart with more temporary stores and exclusive toys. But same-store sales fell 5 percent at its international segment.
Overall, a tough 2010 holiday season had margins hit across the toy industry by bargain-seeking, recession-hit consumers.
So the economic environment has stoked continued debate between management and owners at Toys R Us about whether this is the best time to re-launch an IPO, according to a source briefed on the situation, the Post reported.
Toys R Us was taken private in 2005 by Kohlberg Kravis Roberts KKR.AS, Bain Capital and Vornado Realty Trust in a $6.6 billion deal.
In May 2010, the company filed to raise as much as $800 million in an IPO. But that was not launched.
Toys R Us’s net loss widened to $93 million in the third quarter ended on October 30, 2010, from $67 million a year earlier. While sales were up 1.9 percent in the period, total operating expenses rose about 9.4 percent.
Last fall, the retailer opened 600 smaller “pop-up” stores that added to the more than 850 larger year-round stores it operates in the United States, the Post said.”
Two years after Microsoft tried to acquire Yahoo! for $33/share and the company lost half its market value, AOL and Silver Lake have separately lined up financial advisers to explore options for the company. AOL is also exploring a scenario where Yahoo!’s Asian assets are spun off and the capital is returned to shareholders before the acquisition. AOL has been extremely proactive in buying companies over the past two months, purchasing 5min Ltd., an Internet content provider and TechCrunch, a popular technology blog.
Bloomberg announced today that KKR is also interested in helping finance the transaction. Silver Lake Partners and Blackstone are currently in buyout talks. The sponsors are interested in Yahoo!’s 40% stake in Alibaba, a growing Chinese online business. Yahoo! currently employs about 13,600 people and had revenues of about $1.6 billion last quarter. Shares in the company rose 9.5% on the rumors today, and the firm’s management team may have hired Goldman Sachs as a takeover defense advisor to ward off bids.
According to the WSJ, analysts say that a Yahoo!-AOL merger could create a strong competitor in the display ads market, which is estimated to be $20 billion this year. This should be an interesting transaction, if it proceeds further, as Yahoo has a market capitalization of $21.85 billion and AOL has a market capitalization of $2.66 billion. However, analysts value Alibaba.com at between $15bn and $25bn, which means that Yahoo!’s 40% stake could be worth $10 billion. By selling those assets, Yahoo!’s market value would fall to about $11 billion, which would make the deal much more realistic.
On the other hand, Alexei Oreskovic and Sue Zeidler argue that the company will have hurdles even if it does get bought out. Yahoo! made many desperate attempts to grow revenue this year, such as its attempts to purchase foursquare and Groupon. According to one analyst, “making Yahoo! bigger or smaller will not accomplish anything.” Yahoo! is the 2nd most popular search engine behind Google, but it has failed to find growth in page views or new business. From a private equity investor’s point of view, Yahoo! may simply be attractive because of the steady cash flow it generates, if nothing else.
Ever since the First Data buyout by KKR, the BPO industry has been a target for large cap private equity funds across the United States. The First Data deal was a $29 billion deal, and at the time, the company was largest publicly traded American electronic transaction processing company. Fiserve has an enterprise value of over $13 billion, and about $750 million in EBITDA. This gives an EV/EBITDA multiple of 17.0-18.0x, even higher the multiple paid for First Data.
Silver Lake and Warburg Pincus also recently bought IDC, Interactive Data Corp., seeing revenue growth potential in the need for market transparency across financial institutions. IDC provides reference data, markets pricing and trading infrastructure services to customers, including mutual funds, asset managers and banks. The IDC deal, a carve out from Pearson valued at $3.4 billion, would have been the largest deal this year.
According to Reuters, Fidelity National Information Services, Inc. (FIS) is a global provider of banking and payments technology solutions, processing services and information-based services. It offer financial institution core processing, card issuer and transaction processing services, including the NYCE Network, a national electronic funds transfer (EFT) network. As of December 31, 2009, FIS had more than 300 solutions serving over 14,000 financial institutions and business customers in over 100 countries spanning segments of the financial services industry. Additionally, the Company provide services to numerous retailers, through the check processing and guarantee services. The Company operates in four business segments: Financial Solutions Group (FSG), Payment Solutions Group (PSG), International Solutions Group (ISG), and Corporate and other. On October 1, 2009, FIS completed the acquisition of Metavante Technologies, Inc. (Metavante).
According to Mr. Miller of Bloomberg, ” Blackstone Group LP, Thomas H. Lee Partners LP and TPG Capital are in talks to pay more than $15 billion including debt for Fidelity National Information Services Inc., said a person with knowledge of the matter, a deal that would value the company at about $32 a share.
Fidelity National Information may reach an agreement with the buyout group as soon as May 16 if talks don’t collapse, this person said, speaking on condition of anonymity because the discussions are private. Marcia Danzeisen, a spokeswoman for Fidelity National, didn’t return a call after regular business hours yesterday.
A $15 billion deal would be about three times as big as the largest leveraged buyout since the credit markets crumbled in July 2007, showing how private-equity firms are again putting capital to work after more than a two-year drought in transactions. LBO funds worldwide have about $500 billion of unspent committed capital, according to researcher Preqin Ltd.
Private-equity firms announced about $24 billion of company takeovers so far this year, compared with $5.7 billion during the same period in 2009.
For Fidelity National Information, a Jacksonville, Florida- based payment-processing company, a deal in the $32 a share range would represent more than a 20 percent premium to the $26 closing stock price on May 5, the last day before the Wall Street Journal reported the company was in buyout talks.
Other private-equity firms have recently held talks about joining the group bidding for Fidelity National Information, said two people with knowledge of the matter. With banks preparing about $10 billion in debt financing, the private- equity group would have to put up more than $5 billion, one of the people said.
Bank of America Corp., Barclays Plc, Citigroup Inc., Credit Suisse Group AG, Deutsche Bank AG and JPMorgan Chase & Co. are among the banks that have been working on financing the takeover, said other people with knowledge of the matter.
Credit-market turmoil in 2007 led banks to pull back on leveraged loans used to finance buyouts. Since July of that year, the largest LBO was that of IMS Health Inc., acquired in February for about $5 billion including debt.
Fidelity National Information had about $2.9 billion of net debt and noncontrolling interest as of March 31. With about 377 million shares outstanding as of April 30, a deal at $32 a share would value the company’s stock at $12.1 billion.
Thomas H. Lee, also known as THL Partners, already owns about 4.4 percent of Fidelity National, according to data compiled by Bloomberg. Private-equity firm Warburg Pincus is the company’s largest shareholder, with about 11 percent.
Fidelity National Information processes payments and issues cards for more than 14,000 institutions globally. The company had profit of $105.9 million in 2009 on revenue of $3.77 billion.
Spokesmen for Blackstone, THL, and TPG declined to comment or didn’t immediately respond to calls seeking comment.”
Short video clip describing HCA IPO and roadshow process.
Four years after its buyout, HCA, the largest hospital chain in the United States is preparing for an IPO that could raise as much as $3 billion for KKR and its investors. HCA has over 160 hospitals and 105 outpatient-surgery clinics in 20 states and England. The IPO would help the firm pay down some of its $26 billion in debt. The company is very well positioned to benefit from health care reform. According to Analysts, this specific IPO would be the largest in the U.S. since March 2008, when Visa Inc. raised almost $20 billion…A takeover of a public company of more than $6 billion including debt hasn’t been announced since 2007. HCA has fared much better than other mega-buyouts from 2006/2007, and is only levered at 4.8x trailing EBITDA.
According to Bloomberg, “HCA Inc., the hospital chain bought four years ago in a $33 billion leveraged buyout led by KKR & Co. and Bain Capital LLC, is preparing an initial public offering that may raise $3 billion, said two people with knowledge of the matter.
HCA plans to interview banks to underwrite the sale in the coming weeks, according to the people, who asked not to be identified because the information isn’t public. The sale, slated for this year, may fetch $2.5 billion to $3 billion, the people said. HCA’s owners, which include Bank of America Corp. and Tennessee’s Frist family, may seek $4 billion, said another person familiar with the plans.
The stock offering would be the biggest U.S. IPO in two years and help HCA pay off debt, the people said. The hospital operator may profit from the health-care legislation President Barack Obama signed into law on March 23 that provides for coverage for millions of uninsured patients, said Sheryl Skolnick, an analyst at CRT Capital Group LLC in Stamford, Connecticut.
HCA is “extremely well-positioned to benefit from health reform because their hospitals tend to be concentrated in significant markets” including Denver, Dallas, Houston, Kansas City, Missouri, and Salt Lake City, Skolnick said yesterday in a telephone interview. “Health reform was very important to this decision.”
Kristi Huller, a spokeswoman for KKR, and Alex Stanton, a Bain spokesman, declined to comment, as did Jerry Dubrowski, a Bank of America spokesman. Ed Fishbough, a spokesman for HCA, didn’t immediately respond to a phone call and e-mail seeking comment.
Private-equity firms spent $2 trillion, most of it borrowed, to buy companies ranging from Hilton Hotels Corp. to Clear Channel Communications Inc. in the leveraged-buyout boom that ended in 2007 and are now seeking to cut that debt before it matures.
U.S. IPO investors have been leery of companies backed by private equity this year. In the biggest offering so far, Bain’s Sensata Technologies Holding NV sold $569 million of shares last month at the low end of its estimated price range. In February, Blackstone Group LP’s Graham Packaging Co. and CCMP Capital Advisors LLC’s Generac Holdings Inc. were forced to cut the size of their offerings.
HCA may file for the IPO with the U.S. Securities and Exchange Commission as early as next month, said one of the people.
The IPO would be the largest in the U.S. since March 2008, when Visa Inc. raised almost $20 billion. HCA would be the biggest IPO of a private-equity backed company in the U.S. since at least 2000, according to Greenwich, Connecticut-based Renaissance Capital LLC, which has followed IPOs since 1991.
HCA’s owners put up about $5.3 billion to buy the company, according to a regulatory filing, funding the rest with loans from banks including Bank of America, Merrill Lynch & Co., JPMorgan Chase & Co. and Citigroup Inc. The IPO would lower HCA’s debt load rather than allowing owners to reduce their stakes, said the people.
The hospital chain’s purchase in 2006 shattered the record for the largest leveraged buyout, held since 1989 by KKR’s acquisition of RJR Nabisco Inc. HCA’s record was eclipsed by Blackstone’s acquisition of Equity Office Properties Trust and again by the 2007 takeover of Energy Future Holdings Corp., by KKR and TPG Inc., for $43 billion including debt.
Later that year, the global credit contraction cut off the supply of loans necessary to arrange the largest LBOs. A takeover of a public company of more than $6 billion including debt hasn’t been announced since 2007.
$25.7 Billion Debt
HCA, the largest U.S. hospital operator, had about $25.7 billion of debt as of Dec. 31, about 4.8 times its earnings before interest, taxes, depreciation and amortization, even before HCA’s owners tapped credit lines in January to pay themselves a $1.75 billion dividend. Tenet Healthcare Corp.’s ratio was 4.4 and LifePoint Hospitals Inc.’s was 2.85 at year- end, according to data compiled by Bloomberg.
Health-care companies have fared better than the average private-equity investment during the economic decline. KKR said in February that its holding in the company had gained as much as 90 percent in value as of Dec. 31, while stakes in Energy Future Holdings Corp. and First Data Corp. were worth less than their initial cost.
Hospitals will probably be “net winners” in the health- care legislation, said Adam Feinstein, a New York-based analyst at Barclays Capital, in a March 26 note to investors. HCA, Dallas-based Tenet and Brentwood, Tennessee-based LifePoint may gain because the legislation will reduce hospitals’ losses from providing charity care to the poor and uncollectible bills.
HCA has 163 hospitals and 105 outpatient-surgery clinics in 20 states and England, according to the company’s Web site.
The company was founded in 1968, when Nashville physician Thomas Frist Sr., and his son, Thomas Frist Jr., and Jack Massey built a hospital there and formed Hospital Corp. of America. By 1987, the company had grown to operate 463 hospitals, according to the company’s Web site. Thomas Frist Sr. is also the father of Bill Frist, a physician and the former Senate majority leader.
HCA went private in a $5.1 billion leveraged buyout in 1989, then went public again in 1992, according to the company Web site. In 1994, HCA merged with Louisville, Kentucky-based Columbia Hospital Corp. In the mid-1990s the company, then called Columbia/HCA Healthcare Corp., operated 350 hospitals, 145 outpatient clinics and 550 home-care agencies, according to the company.
In December 2000, HCA agreed to pay $840 million in criminal and civil penalties to settle U.S. claims that it overbilled states and the federal government for health-care costs. It was the largest government fraud settlement in U.S. history at the time, according to a U.S. Justice Department news release on Dec. 14, 2000.
A credit-market rally has helped HCA extend maturities on some of its debt. HCA has sold $4.46 billion of bonds since February 2009 in a bid to repay bank debt and delay maturities, according to data compiled by Bloomberg. The company still has about $11 billion coming due over the next three years, according to Bloomberg data. It is also negotiating with lenders to amend the terms of a bank loan.
HCA offered earlier this month to pay an increased interest rate to lengthen maturities on $1 billion of bank debt, according to two people familiar with the matter. The amendment would allow HCA to move part of the money due under its term loan B to 2017 from 2013. Even after the refinancing and debt pay downs, the company will still have to access the “capital markets to address remaining maturities,” said Moody’s Investors Service Inc. in a note last month.
“It will be difficult for the company to meaningfully reduce the amount of debt outstanding through operations due to limited free cash flow generation,” Moody’s said.”
Here is an article from 4 years ago by the NY Times describing the mega-buyout:
“HCA, the nation’s largest for-profit hospital operator, said today that it had agreed to be acquired by consortium of private investors for about $21 billion. The investors will also take on about $11.7 billion of HCA’s debt.
Skip to next paragraph
The overall deal, which the company valued at about $33 billion, would rank as the largest leveraged buyout in history, eclipsing the $31 billion takeover of RJR Nabisco in 1989 by Kohlberg Kravis Roberts & Company.
The group of buyers is led by the family of Senator Bill Frist, the Senate majority leader. His father, Thomas Frist Sr., and his brother, Thomas F. Frist Jr., founded HCA.
The other investors are Bain Capital, Kohlberg Kravis Roberts and the private equity arm of Merrill Lynch.
The deal appears to be driven by trends both on Wall Street and in the health care industry. For one thing, the private equity business — in which investment companies pool capital from investors in order to buy companies and then resell them or take them public — is swimming in cash. And private equity firms are eager to invest in a company like HCA, which generates a lot of revenue and, judging by its stock price, is seen as undervalued by investors.
Like many other for-profit hospital companies, HCA has seen its stock perform poorly in recent years. The whole industry has struggled with increasing amounts of bad debt, as more people fail to pay their bills because they do not have sufficient health insurance or any coverage.
Separately, various private equity firms have made a number of huge deals recently: Univision for $12.3 billion in June; $22 billion for Kinder Morgan in May; General Motors’ finance unit, GMAC, for as much as $14 billion in April.
Earlier this month, the Blackstone Group said it had lined up $15.6 billion in commitments for its latest buyout pool, forming the world’s largest private equity fund.
HCA was taken private once before, in the late 1980’s by the company’s management, which at the time thought it was undervalued. The move turned out to be a success, and HCA went public again a few years later.
Today’s deal promises to generate large fees for Wall Street bankers and lawyers, who have been toiling away on the transaction for months. Credit Suisse, Morgan Stanley and Shearman & Sterling are advising HCA; Merrill, Bank of America Corporation, Citigroup Inc., J. P. Morgan Chase and Simpson Thacher & Bartlett are financing and advising the buying group.
HCA is the nation’s largest for-profit hospital chain, with 2005 revenues of roughly $25 billion. Based in Nashville, Tenn., the company operates about 180 hospitals and nearly 100 surgery centers.
After merging with Columbia Hospital Corporation in 1994, HCA became the subject of a sweeping federal Medicare fraud investigation; it agreed to pay $1.7 billion to settle the matter. Thomas Frist Jr., who had left HCA’s management before the fraud charges arose, eventually returned as chief executive in 1997. He stepped down as chairman in 2002, but he remains on the company’s board of directors.
Senator Frist’s ties to the company have drawn criticism over the years, as he has been active in the Senate on a variety of health-care initiatives that have the potential to affect the large hospital company. Last fall, the Securities and Exchange Commission began an investigation into his decision to sell stock, once estimated to be worth more than $10 million, which was held in a trust.
Mr. Frist sold the stock in June 2005, just as the price of HCA stock peaked and shortly before it fell the following month; the sale was disclosed in September. He has said that the timing of the sale was a coincidence, the result of a decision to divest his holdings in the company, and that he is cooperating with the investigation.
Under the terms of today’s deal, the consortium of investors would pay $51 a share for HCA’s outstanding common stock, roughly 15 percent more than the company’s trading price early last week, when word spread that the negotiations had faltered. Today, HCA’s stock rose $1.61, or 3.4 percent, to close at $49.48 on the New York Stock Exchange.
The investor consortium is expected to borrow about $15 billion to finance the deal. But with the high-yield bond market tightening, raising that amount could be a challenge.
There is also the possibility that another group could emerge with a rival offer. HCA has included a provision in its deal with the investor consortium that allows it to actively seek a higher offer. Firms like the Blackstone Group and the Apollo Group, as well as rival hospital operators, could try to bid.”
Surprisingly, buyout firms are having difficulty finding good companies to invest in because of regulations and the perceived risk still in the market. There is approximately $503 billion in dry powder just waiting on the sidelines, waiting to be invested. Berkshire Partners still does not know how to invest 40% of the $3 billion fund it raised in 2006. TPG recently released investors of $2 billion in commitments. Harvest Partners, a NY based middle market fund still has to invest 60% of its fund!
According to Ms. Thornton, Ms. Alesci, and Mr. Kelly of Bloomberg, ” Buyout funds sitting on half a trillion dollars committed by investors may need more than a decade to put the money to work if mergers and acquisitions continue at the current pace.
Firms led by Blackstone Group LP and KKR & Co. announced $87 billion in deals over the past 12 months, according to data compiled by Bloomberg. At that rate, it would take until the middle of 2021 to invest an estimated $503 billion in unspent money, assuming they borrow half the purchase price. Firms usually have three to six years to deploy commitments.
“Unless things really change, larger funds will be especially hard pressed to put their money to work,” said Steve Kaplan, a finance professor at the University of Chicago.
The record amount of capital, most of it raised during a three-year boom that ended with the financial crisis, coupled with fewer and smaller purchases, means firms may have to ask for more time or release investors from capital commitments if they can’t put the money to work. Boston-based Thomas H. Lee Partners has three years left to invest almost half of a $10 billion fund raised in 2006, and London-based Permira Advisers LLP has until the end of 2012 to put $4.9 billion of a $12.2 billion fund to work, according to researcher Preqin Ltd.
“Investors only give the fund a particular investment period, typically three to six years, to invest the capital,” said Michael Harrell, co-chair of Debevoise & Plimpton LLC’s private-equity funds group in New York. “If you don’t use it, you lose it.”
The funds that may eventually face the toughest time are the industry’s largest, raised in 2007 and 2008. TPG has $15.3 billion left of an $18.9 billion fund raised in 2008, according to a person with direct knowledge of the fund. A European fund raised by CVC Capital Partners Ltd. in the same year has $11.3 billion left of $14.2 billion, according to London-based Preqin.
TPG and CVC declined to comment.
Of the $503 billion in unused capital, $86 billion is from funds raised between 2004 and 2006, Preqin data show. Funds raised in 2007 and 2008 account for $310 billion in so-called dry powder.
Palladium Equity Partners LLC, a firm that makes equity investments of $15 million to $75 million in the U.S. Hispanic market, has until the end of the third quarter to deploy about half of $800 million raised in 2004, according to a person with knowledge of the firm’s investments who declined to be identified because the information is private.
New York-based Harvest Partners, which specializes in buyouts of middle-market companies, has yet to deploy 64 percent of $815 million it raised in 2006, according to the firm. The fund’s investment period ends in 2012.
“A lot of people are in this position,” said Robert Finkel, managing partner of a Chicago-based private-equity firm Prism Capital and author of “The Masters of Private Equity and Venture Capital.”
Spokesmen for THL, Permira, Harvest and Palladium declined to comment on their funds and how they plan to invest the capital.
By rushing to deploy billions of dollars, buyout firms are driving up price tags. Prices paid in leveraged buyouts last year, after the worst financial crisis in seven decades, were about 25 percent higher on average than in 2001 after the dot- com bubble, according to Standard & Poor’s Leveraged Commentary & Data.
Driving Up Prices
Prices in Europe are “almost as high as they’ve ever been,” Blackstone President Tony James said on a call with reporters Feb. 25. “When there’s something in the right range, it’s very competitive.”
Blackstone and KKR, the largest publicly traded private- equity firms, have told investors they see a pick-up in the pace of buyouts. Between the second quarter and the fourth quarter of last year, the value of deals doubled to $31.9 billion. Still, deals announced in the past three months, at $23.9 billion, remain below the $25.3 billion in the same period a year earlier, data compiled by Bloomberg show.
CCMP Capital Advisors LLC is among those that have returned to the buyout market. The New York-based firm on March 8 agreed to buy database marketing company Infogroup Inc. for about $463 million in cash. When the deal is completed, CCMP will have deployed half of its current fund and must allocate the remainder by 2012, when the investment period ends, according to the firm.
Returning to Market
“The market has just returned to a level where transactions can happen because they’re a fair reflection of the asset values,” CCMP Chief Executive Officer Stephen Murray said in an interview.
CCMP offered $8 a share for Infogroup, a discount of 2 percent compared with the previous closing price of $8.16. The price values the company at 9.2 times earnings before interest, tax, depreciation and amortization. The average for U.S. private-equity-led transactions in 2009 was 7.7 times Ebitda. Including a debt restructuring, the Infogroup deal is valued at $635 million, or 12.6 times Ebitda, according to Bloomberg calculations based on company data. Excluding restructuring and one-time charges, CCMP paid 5 times Ebitda for Infogroup.
Some funds say their investors are glad they have held on to their commitments during the buyout boom, when rising prices hurt returns. Boston-based Berkshire Partners LLC has not yet decided how to invest 40 percent of a $3.1 billion fund it raised in 2006. The investment period ends in 2013.
‘Bunch of Blanks’
“Our investors care most about making good investments, not the quantity. Our investors give us a lot of credit for not investing as much as many others did in 2006 and 2007,” said Kevin Callaghan, a managing director of Berkshire Partners. “You’d rather have dry powder than a bunch of blanks.”
New York-based Diamond Castle has $479 million, or 26 percent, of $1.82 billion it raised in 2005 that has not been deployed. The firm says it’s keeping commitments in reserve for portfolio companies’ needs.
“It is not unusual for private-equity firms to reserve a portion of the committed capital for follow-on investments,” Diamond Castle senior managing director Ari J. Benacerraf wrote in an e-mail.
New York-based JLL Partners has $200 million, or 13 percent, left of $1.5 billion raised in 2005 and an investment period that ends at the end of the year. Paul Levy, a founding partner, said the fund is looking at potential acquisitions and has reserved capital to invest in its existing portfolio companies.
Venture Capital’s Lesson
If funds “have a lot of money that’s not invested, they’ll ask for an extension,” Levy said in an interview.
The industry’s predicament has parallels with the venture capital industry in 2002, according to Josh Lerner, a professor of investment banking at Harvard Business School in Boston. By 2002, more than 20 venture capital firms had returned near or in excess of $1 billion, because acquisitions had slowed and shrunk in value compared with the peak of the Internet bubble when the money was raised.
“Like the venture capital firms in 2002, the pace of buyout firms’ deals has become slower and the size of their deals has become smaller,” said Lerner. “It’s a real issue for private-equity firms.”
Announced buyouts reached volumes of as much as $43 billion in 2007, when Goldman Sachs Group Inc., KKR & Co. and TPG banded together to buy the largest power utility in Texas, known at the time as TXU Corp. That’s 8.6 times the $5 billion that TPG and the CPP Investment Board agreed in November to pay for IMS Health Inc. in the largest buyout of the past 12 months.
The average leveraged buyout in the last three months has shrunk to $185 million from $646 million in 2007, according to Bloomberg data.
Fort Worth, Texas-based TPG has already released investors from $2.1 billion of commitments to a $4.6 billion fund raised in 2008 to invest in financial institutions. The buyout firm decided there were fewer opportunities to invest in financial institutions in part because of regulations, according to a person familiar with the firm.
Some older funds have also released investors from their commitments or asked for extensions of the life of their funds. New York-based buyout fund Vestar Capital Partners, with $7 billion of capital committed to its funds, cut commitments to a $2.48 billion fund raised in 1999 by 2 percent at the end of last year. The firm had kept 6 percent of the commitments for add-on investments or other purposes, according to Vestar spokeswoman Carol Makovich.
“If I were an investor and it’s been 11 years, I’d say ‘enough already,’” said University of Chicago’s Kaplan.
As pricing for junk bonds and leveraged loans falls, more private equity firms are looking at U.S. and emerging market retail opportunities for buyouts. T.H. Lee Partners just purchased CKE restaurants in February and Indian and Brazilian buyouts have been closing recently as well. As the rest of the world grows faster than the U.S. and Europe, there will be more and more buyouts overseas.
According to Mr. Kelly and Ms. Coleman of Bloomberg, private-equity firms looking to buy retail and consumer companies said they’re now able to finance deals and pay reasonable prices after the credit crisis and global recession triggered a buyout slump.
“It feels like it’s a little bit of Goldilocks now,” Alex Pellegrini, a New York-based partner with Apax Partners LLP, said today. “It feels just right.”
Buyout managers are getting back to business after the global credit crisis that began in 2007 froze them out of buying companies or selling what they owned. About $12.9 billion worth of private-equity deals have been announced in the past three months, compared with $2.5 billion in the same period a year earlier, according to data compiled by Bloomberg.
“The last couple months would suggest that people are getting active again,” said John Howard, chief executive officer of New York-based Irving Place Capital Management LP, noting his firm hasn’t made a retail investment in four years. “We’re seeing more real opportunities.”
Financing from Wall Street banks is returning for some deals after financial institutions suffered losses of $1.7 trillion since the onset of the credit crisis. Howard said deals require investors to contribute more of their own cash and less borrowed money, which means he and other managers are most interested in targets they think will boost sales and profits.
U.S. comparable-stores sales climbed 4.1 percent in February, topping the 3 percent growth estimate by researcher Retail Metrics. It was the sixth-straight monthly gain and the biggest in more than two years.
A stabilizing economy is helping broaden the number of potential targets beyond distressed companies that had no choice but to sell during the recession, said David Oddi, a co-founder of New York-based Goode Partners LLC.
“Over the past couple years, the best businesses have had the luxury of sitting on the sidelines,” Oddi said. “What we’re seeing now is more of the quality companies return to the market.”
The private-equity executives spoke on a panel moderated by Les Berglass, founder of executive-search firm Berglass + Associates, at Bloomberg’s headquarters in New York.
Thomas H. Lee Partners LP agreed last month to buy CKE Restaurants Inc., the owner of Carl’s Jr. and Hardee’s fast-food chains, for about $619 million cash and assuming about $309 million in debt. CVC Capital Partners agreed to buy the retail unit of PT Matahari Putra Prima for 7.2 trillion rupiah ($772 million) in January.
Carlyle Group, the world’s second-biggest private-equity company, is among the firms looking beyond the U.S. for deals, said Sandra Horbach, who runs the Washington-based firm’s consumer and retail group from New York.
“There are certainly some countries today that have more robust growth than we’re seeing here in the United States,” Horbach said, noting the firm’s purchase of Brazilian tour operator CVC Brasil Operadora e Agencia de Viagens SA this year.
Carlyle also is poised to take advantage of stabilized capital markets to sell some of its investments, Horbach said. The firm is among the owners of Dunkin’ Brands, the operator of the Dunkin’ Donuts and Baskin Robbins chains, which is a likely candidate for an initial public offering, Horbach said.
“That’s a company that we know will go public at a very attractive valuation and it’s just a question of timing,” she said.
Buyout-backed companies including Dollar General Corp., owned by KKR & Co., have successfully gone public. Shares of the Goodlettsville, Tennessee-based discount retailer have gained almost 20 percent since they were sold in an IPO in November.
Private-equity firms may more often reap profits from consumer-focused investments by selling them to other investors or to larger companies, so-called strategic acquirers, rather than selling them to the public, Horbach said.
Shifting out of a defensive mode into a mindset of growing, and eventually selling companies, has private-equity owners looking to hire top executives. Berglass, the executive-search executive, said his business has increased 50 percent since last June. It’s a signal that things are picking up, he said.
“Every time the economy has dipped, we find ourselves the first ones coming back,” Berglass said.
It looks like the private equity market is improving as the past month has been ripe with middle market offers, as the financing market has eased. This latest deal is being advised by Bank of America Merrill Lynch and Jefferies. After KKR passed on the offer, Bain & Company may place an equity bid for Psychiatric Solutions, a for-profit operator of mental-health hospitals.
Mr. McCracken and Lattman of the WSJ write: “Psychiatric Solutions Inc., a for-profit operator of mental-health hospitals and clinics, is in talks to be acquired by private-equity firm Bain Capital, according to several people familiar with the matter.
Psychiatric Solutions has a market capitalization around $1.35 billion. An exact takeover price couldn’t be determined Wednesday, but the firm was seeking around a 25% premium to its current market price, said people familiar with the matter. Any deal would include the assumption of Psychiatric Solutions’s outstanding $1.2 billion of debt.
Shares in the company, the largest for-profit psychiatric chain in the country, were trading near $30 last year. They were trading below $24 Wednesday afternoon. An agreement is still more than a week away, according to people familiar with the talks, though the deal may still fall apart in its final stages.
Private-equity firms have been in discussions with Psychiatric Solutions since last fall. CCMP Capital Advisors and Kohlberg Kravis Roberts & Co. looked at the business but eventually passed. Blackstone Group was also considering merging the company into its hospital chain Vanguard Health Systems Inc., according to people familiar with the firm’s thinking.
Boston-based Bain is now the most likely buyer. The firm is one of the lead investors in Nashville, Tenn.-based HCA Inc., the nation’s largest hospital operator, which Bain and KKR acquired for $21.3 billion in 2006.
A Psychiatric Solutions spokesman didn’t return a call seeking comment.
Bank of America Merrill Lynch is both advising and financing Psychiatric Solutions on the deal. Jefferies & Co. is providing additional financing.
A deal would show how the stabilization in corporate lending markets is encouraging private buyers such as Bain to put money to work. And a $3 billion acquisition would be among the largest leveraged buyouts struck since the credit markets collapsed in mid-2007.
In the past two weeks, Thomas H. Lee Partners agreed to acquire CKE Restaurants Inc., the parent company of Hardees and Carl’s Jr. restaurants for about $620 million; Abry Partners announced a deal to acquire cable operator RCN Corp. for $531 million; and CCMP purchased Infogroup Inc. for $460 million.
Psychiatric Solutions has more than 90 psychiatric hospitals and treatment centers in 32 states, with a heavy concentration in the East and Southeast. It has about 20,000 employees. The firm specializes in treating children with behavioral or mental illnesses. Besides its own sites, it also manages psychiatric units for other hospitals and government agencies. It reported 2009 sales of $1.8 billion.
Psychiatric Solutions has faced a number of allegations regarding the treatment of its patients, which has affected the company’s stock price. In July 2008 the Chicago Tribune published a report disclosing alleged unreported violence among juvenile patients at its Riveredge Hospital facility in Forest Park, Ill. A state-commissioned study by the University of Illinois-Chicago, published in August 2009, concluded that the facility failed to protect young patients from sexual assault and didn’t properly report attacks to authorities.
In February 2009, the company’s stock dropped 36% to a four-year low of about $10 per share after it reported weak earnings results attributable in part to the issues at Riveredge. “