Jack Bovender Jr. may not be a showman on par with Nashvilles country music legends, but he still draws a crowd.
Bovender, the chairman and chief executive officer of privately held HCA, spoke at a recent luncheon organized by the Nashville Health Care Council. Nothing in his presentation was headline news, exactly, yet he packed a ballroom at the Nashville Marriott at Vanderbilt University on the west side of the city. Its just a short trip from HCAs headquarters across Centennial Park, if one were willing to walk.
Bovender spoke more about how HCA came to be a private company for the third time than he spoke about what the experience has been like since the $33 billion deal was completed in November 2006. He said one of HCAs directors asked in September 2005 whether a leveraged buyout was an option for the company, but the board agreed that HCA was now too big for a such a deal, unlike 1988, when $5.1 billion took the company private.
My absolute biggest surprise was that you could borrow $28 billion, Bovender quipped during the brief question-and-answer session.
It wasnt until April 2006, during a discussion with Jim Forbes, head of the healthcare industry banking for Merrill Lynch & Co., that Bovender and HCA gave an LBO more consideration.
Once a serious proposal that included a significant investment from the management team was developed, Bovender said, it was the independent directors who took over the process.
Bovender struck some defiant notes during the presentation, belying his calm tone and mild drawl. His slide presentation included one noting the criticisms the company received from some healthcare stock analysts, with outtakes from four analyst reports. With the company buying back so much of its stock anyway, Bovender said, HCA realized that it simply didnt need public equity any longer. When asked what operating changes the company has made since the deal, Bovender came as close he can to sounding rankled:
This was not the purchase of a broken company. This was not a turnaround story, he said. This was a valuation deal. He praised the companys majority ownersBain Capital, Kohlberg, Kravis Roberts & Co., and Merrill Lynch Global Private Equityfor having more patience than the public markets, with their focus on quarterly results rather than the long-term growth of the company.
Bovender seemed to enjoy noting that predictions that the company would sell a chunk of its hospital portfolio havent come true. (Some of those predictions made by analysts and observers were published in Modern Healthcare, but he didnt mention any names of predictors or publishers.) Making HCA a smaller company, Bovender said, would reduce its operating earnings, and that would reduce the price that public equity investors will be willing to pay when the company goes public again in five or six years, so a sell-off doesnt make sense.
One could reply that selling hospitals that arent doing well financially could help operating earnings (specifically, earnings before interest, taxes, depreciation and amortization). HCA pruned 16 hospitals, net of acquisitions and not counting its overseas holdings, during the six years ending in 2006, according to securities filings. That pruning didnt seem to hurt the price paid for the company last November.