Triad Hospitals will go private
A Goldman Sachs unit and a spin-off of JPMorgan will pay $4.7 billion. The industry is in flux, but generates cash.
PLANO, Texas - Triad Hospitals Inc. said yesterday that it had agreed to be taken private in a $4.7 billion sale to an affiliate of the Goldman Sachs Group Inc. and a firm spun off from JPMorgan Chase & Co.
The announcement comes on the heels of hospital giant HCA Inc.'s sale to private owners. Also, Tenet Healthcare Corp. appears ready to sell two of its Philadelphia-area hospitals.
The hospital industry is struggling with flat patient volume and rising numbers of unpaid bills from uninsured patients. Triad said yesterday that its provision for "doubtful accounts" would equal one-eighth its revenue in the fourth quarter and cut into earnings.
Still, analysts said, hospital companies generate huge amounts of cash, making them attractive buyout targets.
Triad agreed to be purchased for $50.25 a share, a 16 percent premium over Triad's closing stock price on Friday. The buyers, affiliates of CCMP Capital Advisors L.L.C. and GS Capital Partners L.P., will also assume $1.7 billion in debt.
Shares of Triad rose $6.38, or 14.7 percent, to close at $49.65 on the New York Stock Exchange.
Triad's board has approved the agreement and recommended that stockholders approve it. The sale is subject to regulatory approvals, but there are no financing conditions, the companies said.
James D. Shelton, Triad's chairman and chief executive officer, said the sale was in the best interests of the company and its stockholders. A deal had been considered likely since October, when Shelton told analysts he was "having some good conversations" with "two or three" private-equity firms and would continue talking.
Analysts said there could be another bid for the company, either from another private-equity group - the Blackstone Group L.P. is believed to be interested - or a rival hospital operator.
Triad has 40 days to solicit better offers, and it would pay a relatively light $40 million penalty for walking away from CCMP, which was spun off from JPMorgan's private-equity arm, and the Goldman Sachs affiliate.
Triad was spun off from HCA in 1999 and grew by snapping up smaller hospital operators, mostly in the West and Southwest. It operates 53 hospitals and 13 outpatient-surgery centers with nearly 10,000 beds.
Sheryl Skolnick, an analyst with CRT Capital Group L.L.C., said the private-equity groups valued Triad because it had relatively light debt and strong real estate holdings, and because it had not made much of an effort to control costs.
"From the private-equity point of view, that's low-hanging fruit," she said. "They can cut overhead costs without compromising patient care, one hopes."
Skolnick said the offer would look good to most Triad shareholders, since it comes after the company warned of disappointing fourth-quarter results. One group that will not be happy, she said: Those who bought newly minted stock last summer at $53 a share.