Lawyers for HCA fended off one challenge to the $33 billion leveraged buyout of the company last week, but another legal hurdle emerged.
A Tennessee judge said that the Nashville-based company can go ahead with a Nov. 16 shareholders meeting as scheduled, denying a request to delay the meeting to give some shareholders more time to review documents related to the buyout. The shareholders sued HCA in Davidson County Chancery Court, Nashville, and asked the judge to delay the shareholders meeting by a month while their lawyers reviewed hundreds of thousands of document pages.
HCA said in a statement, "We are pleased with the court's ruling and look forward to proceeding with the shareholders meeting on Nov. 16 as planned."
A lawyer for the shareholders could not be reached at deadline.
The remaining hurdle is a lawsuit filed last week in New Hampshire that seeks to delay the buyout while a foundation tries to assert its right to buy 165-bed Portsmouth (N.H.) Regional Hospital from HCA.
The Foundation for Seacoast Health, which was endowed in the mid-'80s with the proceeds of the sale of the formerly not-for-profit hospital to HCA, contends that the leveraged buyout is a sale of the hospital that requires HCA to offer the hospital to the foundation. According to the lawsuit, the first-refusal right was part of the asset purchase agreement.
The foundation contends that the leveraged buyout will put pressure on local managers to cut staff and unprofitable programs. The foundation asked a judge in Rockingham Superior Court to block the leveraged buyout until the foundation can determine what a fair price would be for the hospital.
The foundation triggered its first-refusal right in 1994, when Columbia Healthcare Corp. merged with HCA to form Columbia/HCA Healthcare Corp., according to an exhibit that is part of the foundation's lawsuit. HCA paid the foundation $20 million in return for the foundation dropping its right to buy back the hospital, the exhibit showed.
Neither HCA nor the foundation's lawyer, Dan Hoefle, could say whether the foundation asserted its first-refusal right when HCA went private in 1989.
Hoefle, who is also the foundation's vice chairman, said the foundation would not consider a payment to waive its right this time. "This is not about getting a payday," he said. "It's about maintaining healthcare and getting the contract enforced."
HCA's legal position is that the leveraged buyout is a change in ownership of the holding company that owns the subsidiary that owns the hospital, but it is not a sale of the hospital itself, HCA spokesman Jeff Prescott said. "We simply have a disagreement. This does not constitute a sale of the hospital." HCA hopes it can resolve the matter in further negotiations with the foundation, Prescott added.