WSJ: Community Health to buy Triad

Community Health to buy Triad

Email Print By E. Thomas Wood
03-19-2007 6:07 AM —
UPDATE -- After a morning of speculation sparked by The Wall Street Journal, Triad Hospitals announced today that it has agreed to be acquired by Community Health Systems in a $6.8 billion deal.Under the terms of the deal, Triad stockholders will receive $54 cash for each of their shares, putting the cash value of the deal at roughly $5.1 billion. Additionally, Community Health Systems will also assume $1.7 billion of the company's outstanding debt.Following the official announcement, Community Health's stock fell by nearly 9 percent to $33.56. Shares have since rallied somewhat, changing hands for $35.43 as of noon.
As originally reported:
At a speak-now-or-forever-hold-your-peace moment, Community Health Systems has piped up from the congregation.
The nation's largest operator of rural hospitals, based in Cool Springs, has interrupted a $4.5 billion private equity buyout with a better offer for Plano, Texas-based Triad Hospitals, according to an overnight report by The Wall Street Journal.
The Journal says Community Health's price is well above the original offer, so much so that it is "too much to bear" for CCMP Capital Advisors LLC and Goldman Sachs Capital Partners, which had teamed up to buy Triad in a deal announced last month. The report quotes an unnamed source on the inside as saying the private equity partners would walk away from their deal.
Even if the WSJ report is accurate, of course, the Community Health bid could still collapse as the parties work out final details. Neither of the companies would comment to the newspaper.
The transaction announced in February, unlike most recent PE takeouts of publicly traded companies, included a "go-shop" provision that left open the realistic possibility of a competing offer. And the breakup fee payable to CCMP and Goldman, $20 million, is smaller than the punitive amounts attached to many recent deals.
Though Triad is based in Texas, it has substantial local connections. Formed as a spinoff from hospital giant HCA in 1999, it bought locally based hospital operator and manager Quorum Health Group Inc. in 2001. Its board of directors includes former Tennessee Commissioner of Human Services Nancy Ann Min DeParle.
Community Health's purchase, if consummated, will put it in a position either to enter new lines of business or to spin off portions of Triad. In addition to operating 51 hospitals in 16 states, primarily in the Midwest and West, Triad also has ten ambulatory surgery centers. And its QHR subsidiary, formed from the outsourced hospital management business of Quorum, provides management-related services to some 200 hospital clients nationwide.
Community Health already has the second largest number of hospitals of any national chain with 77 facilities in 22 states, behind HCA's 182 hospitals globally. The addition of the Triad facilities ought to allow the company, which has grown rapidly in recent years by buying small numbers of hospitals at a time, to achieve large economies of scale by consolidating management and purchasing functions.