Overcoming a last-minute legal problem involving executive compensation, HealthTrust-The Hospital Co. completed its $1 billion purchase of Epic Healthcare Group last week.
The deal created the nation's second-largest investor-owned hospital chain, with 115 facilities.
But it took some eleventh-hour negotiating to clear the sale, which was nearly delayed by a Texas trial court judge who issued a temporary restraining order just days before the deal was set to close. The judge in Dallas issued the order in response to a lawsuit filed by one of Epic's employee-owners, who alleged the sale would result in excessive compensation arrangements with Epic's directors and officers.
Epic's employees own 61% of the Dallas-based company through an employee stock ownership plan. The lawsuit claimed to be a class-action suit in which the plaintiff, Epic manager Vicki Anderson, represented the interests of all Epic employee-stockholders.
On May 4-one day before the sale was completed-attorneys for Nashville, Tenn.-based HealthTrust and the plaintiff reached a settlement that allowed the deal to proceed and lift the restraining order. Under the settlement, HealthTrust will allow Ms. Anderson and other employee-owners to sue Epic's officers and directors after the merger. And, if the plaintiffs win, HealthTrust will pay any damages if the former officers and directors aren't able to do so.
Epic's officers and directors will receive nearly $60 million in severance and payment for stock appreciation rights as a result of the merger, the lawsuit alleged. Epic Chairman Kenn George alone will receive $23 million as a result of his compensation agreements (April 18, p. 18).
The lawsuit called the compensation an "illicit commission" that reduced the amount of money paid to Epic shareholders.