TPG Capital, the Texas buyout firm started by David Bonderman two decades ago, is exploring the sale of Iasis Healthcare Corp. and enlisted Bank of America Corp. to find buyers, said people familiar with the process.
TPG is seeking as much as eight times earnings before interest, taxes, depreciation and amortization, or about $2.4 billion, said one of the people, who declined to be identified as the negotiations are private. TPG probably will sell the company to another private equity firm as few industry competitors have expressed interest, the people said.
The buyout firm may struggle to get the price it wants, said Sheryl Skolnick, an analyst with CRT Capital Group in Stamford, Connecticut. Hospital values have suffered as investors fret over whether the U.S. Supreme Court will overturn the 2010 health-care law, which party will win the White House and Congress this year and how much they’ll cut health-care spending to close the federal budget deficit, she said.
“Between reform and the election and the deficit, it’s kind of a triple whammy,” Skolnick said by telephone. “Finding someone who wants to be involved in the hospital sector may not be easy.”
Private-equity firms, with their longer-term view, may be more willing to step in, Skolnick said. If the health-care law survives, it’s likely to extend insurance to millions of Americans starting in 2014, a potential windfall for any hospital company, she said.
The winning bidder would gain control of a Franklin, Tennessee-based chain that operates almost 20 hospitals in states such as Arizona, Texas, Florida and Utah. Revenue at Iasis, founded more than a dozen years ago, climbed to $2.8 billion in its latest year, with almost three-fourths coming from acute care.
Private equity firms are facing pressure from clients to sell investments and return capital after fears of global recession stymied so-called exits in the second half of 2011. Private equity firms have made more than 12,500 investments since 2002 yet have realized fewer than 3,500, researcher PitchBook Data Inc. said in a report last month.
TPG, based in Fort Worth, Texas, and its partners acquired Iasis for about $1.4 billion in 2004. TPG spokeswoman Lisa Baker declined to comment. The firm’s health-care investments also include Healthscope Ltd., an Australian operator of private hospitals, and IMS Health Inc., which provides prescription data to drugmakers and analysts. Bank of America’s John Yiannacopoulos declined to comment.
Iasis’s sales in the first quarter ended Dec. 31 rose 1.5 percent to $623.7 million, according to a statement last month. That fell short of expectations from KDP Investment Advisors Inc. as Medicaid rate reductions in some states ate into sales, particularly in Arizona.