HCA Plans Biggest U.S. Private Equity IPO at $4.28 Billion

HCA Holdings Inc., a hospital chain, plans to sell stock valued at as much as $4.28 billion in what would be the largest U.S. private-equity-backed initial public offering on record.

HCA, based in Nashville, Tennessee, will offer as many as 142.6 million shares at $27 to $30 each, according to a filing today. The company aims to sell 87.7 million shares and its owners are offering 36.3 million. Underwriters have the option to purchase an additional 18.6 million shares.

HCA was taken private five years ago in a $33 billion leveraged buyout. Now the owners, including KKR & Co., Bain Capital LLC and Bank of America Corp., are attempting to exploit a “relatively favorable market environment” for U.S. private equity offerings after the $2.9 billion stock sale this month by Kinder Morgan Inc., an energy pipeline company, said Josef Schuster, founder of IPOX Schuster LLC in Chicago. HCA may be ‘pushing the envelope,” Schuster said.

“They’re seeking to take advantage of a perceived window of opportunity, but they are going to have some trouble pricing towards the high end,” Schuster said in a telephone interview. “I would be surprised if everyone jumps in on this deal.”

The IPO of Houston-based Kinder Morgan, selling 95.5 million shares at $30 each, raised 23 percent more money than the company originally sought. Kinder Morgan represents the biggest completed private-equity-backed IPO. Nielsen Holdings NV, a New York-based provider of information and analytics, raised $1.6 billion in January.

Photographer: Harrison McClary/ Bloomberg

HCA headquarters in Nashville, Tennessee. Close

HCA headquarters in Nashville, Tennessee.

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Photographer: Harrison McClary/ Bloomberg

HCA headquarters in Nashville, Tennessee.

HCA plans to list on the New York Stock Exchange and trade under the symbol “HCA.” HCA Holdings is the parent company, as of last November, of HCA Inc.

No Dividend

The private-equity owners are selling 24 percent of the company, a bigger portion than at Kinder Morgan or Nielsen, Schuster said. HCA isn’t offering a dividend and is basing its value on the company’s earnings strength and not revenue growth, he said.

“So it’s neither a growth nor a value stock,” Schuster said.

The hospital operator is trying to go public less than four months after taking on new debt to pay its owners a $2 billion dividend. In 2010, the owners paid themselves a total of about $4.3 billion in dividends.

The private equity investors put up about $5.3 billion to buy the company, according to a regulatory filing, funding the rest with loans from banks, including Charlotte, North Carolina- based Bank of America; and JPMorgan Chase & Co. and Citigroup Inc., both in New York. Those three banks will be the lead underwriters on the planned offering.

“This will be a good test of the market to see if it can take an offering this large,” said Les Funtleyder, an analyst at Miller Tabak & Co. in New York. “If HCA is successful, you’ll probably see a lot more offerings after that.”

May Filing

HCA had $30.7 billion in revenue last year and net income of $1.57 billion, according to the filing.

The company first filed for a public offering in May, and reapplied in December after selling $1.53 billion of 10.5-year notes to help pay for the dividend. In the May filing, the company said it planned to raise $4.6 billion and use $2.5 billion in net proceeds to the HCA treasury to repay debt.

HCA operated 164 hospitals and 106 freestanding surgery centers as of Dec. 31, according to a filing.

The original HCA was founded as Hospital Corp. of America in 1968, when a Nashville physician named Thomas Frist Sr.; his son, Thomas Frist Jr.; and Jack Massey built a hospital and formed one of the first hospital companies in the U.S. Thomas Frist Sr. is also the father of Bill Frist, a physician and a Tennessee Republican who is a former U.S. Senate majority leader.

To contact the reporters on this story: Pat Wechsler in New York at pwechsler@bloomberg.net Christopher Condon in Boston at ccondon4@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net

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