The details of HealthTrust-The Hospital Co.'s $1 billion acquisition of Epic Healthcare Group became clearer last week, as the Nashville, Tenn.-based company filed documents needed to sell $200 million in bonds and $269 million in stock.
HealthTrust will become the nation's second-largest hospital chain when it completes its acquisition of Dallas-based Epic next month (Jan. 17, p. 2). It will operate 115 hospitals and generate $3.4 billion in annual revenues.
HealthTrust will offer as many as 9.4 million shares of common stock. However, some of those shares may be sold by existing shareholders who exercise their stock warrants. HealthTrust executives said 3.4 million warrants are outstanding on HealthTrust stock, which is traded on the New York Stock Exchange.
Shareholders who plan to sell shares were not named in the registration statement, which was filed with the Securities and Exchange Commission, because the company is not sure who will sell their shares and how many they will sell, executives said.
HealthTrust is financing its purchase of Epic's 34 hospitals through a combination of debt, equity and cash.
On the cash side, banks will provide a $1.2 billion credit line. Of that total, between $800 million and $900 million will finance the Epic deal, HealthTrust acquisitions of hospitals in Salt Lake City and Nashville, and transaction costs, said Mary Munoz, who heads the healthcare group in Atlanta for the Bank of Nova Scotia. The bank is one of two lead banks financing the HealthTrust-Epic deal.
Those banks will syndicate the financing by letting other banks take on part of the debt. Bank interest in the syndication has been very strong, and participating banks will receive details about the financing this week, she said.
HealthTrust will use the proceeds of its financings to pay down much of Epic's high-cost debt. Some Epic bonds pay interest rates as high as 14.8% annually.
The Epic acquisition is expected to be completed in late April. Late last month, HealthTrust filed pre-merger notification documents with the Federal Trade Commission. If the FTC doesn't seek additional information on the deal, HealthTrust will be notified on March 28.
The stock offering is being underwritten by Merrill Lynch & Co. and Donaldson Lufkin & Jenrette, both New York-based investment banking firms.