Becker's Hospital Review

29 CFO / FINANCE For-profit hospital operator M&A update: 13 deals involving CHS, Tenet, HCA and LifePoint By Ayla Ellison F our of the largest for-profit hospital op- erators have each entered into several transactions this year. Some of the com- panies are selling off facilities to strengthen their hospital portfolios, while others are ex- ploring ways to expand their reach. Here's a breakdown of the transactions the for-profit hospital companies have entered into as of May 2018: Community Health Systems Aer selling off 30 hospitals in 2017, Franklin, Tenn.-based Community Health Systems an- nounced late last year it intends to sell a group of hospitals with combined revenue of $2 billion. During the first four months of 2018, CHS sold one hospital and signed definitive agreements to sell six others. CHS signed a definitive agreement in late Jan- uary to sell Tennova Healthcare-Jamestown (Tenn.) to West Palm Beach, Fla.-based Ren- nova Health. Rennova announced earlier this month it expects the deal to close on June 1. In February, CHS agreed to divest Leesville, La.- based Byrd Regional Hospital to Allegiance Health Management in Shreveport, La. CHS agreed in March to sell three of its Tennessee hospitals to Jackson-based West Tennessee Healthcare. CHS completed the sale of Bayfront Health Dade City (Fla.) to Altamonte Springs, Fla.- based Adventist Health System on April 1. Lat- er that month, CHS entered into a definitive agreement to sell Ocala, Fla.-based Munroe Regional Medical Center. Orlando-based Flor- ida Hospital, a subsidiary of Adventist Health System, will assume the lease and operations of the 421-bed hospital. CHS is using the proceeds from the transac- tions to reduce its debt load. CHS' long-term debt totaled $13.86 billion as of March 31, a slight decrease from $13.88 billion as of the end of last year. HCA Healthcare Nashville, Tenn.-based HCA Healthcare has entered into several transactions so far this year. In February, HCA expanded its market presence in Georgia when it acquired Savan- nah-based Memorial Health, which includes a 612-bed academic medical center and primary and specialty care network. e company now has eight hospitals in Georgia. In late March, HCA announced it was look- ing to expand into North Carolina with the acquisition of Mission Health, a six-hospital, nonprofit system based in Asheville, N.C. e two parties signed a letter of intent and are currently negotiating a definitive agreement. Under the proposed transaction, HCA would use Mission Health as its platform for growth and expansion across the state. In April, Austin, Texas-based St. David's HealthCare, which is jointly owned by HCA and two nonprofit foundations, acquired e Austin Diagnostic Clinic, a physician group with nine locations. LifePoint Health Brentwood, Tenn.-based LifePoint Health has engaged in far fewer transactions than other major for-profit hospital operators this year. In March, the company said plans to sell three Louisiana hospitals to Allegiance Health Man- agement in Shreveport, La. Under the deal, LifePoint will sell the following hospitals to AHM: Mercy Regional Medical Center in Ville Platte, La.; Acadian Medical Center in Eunice, La.; and Minden (La.) Medical Center. Once the transaction is completed, LifePoint will only have one hospital in Louisiana: Teche Regional Medical Center in Morgan City. Tenet Healthcare Aer reporting a net loss in the third quarter of 2017, Dallas-based Tenet Healthcare launched a $150 million enterprisewide cost reduction initiative. In December, the company expand- ed the plan, which involves cutting jobs, rene- gotiating contracts with suppliers and vendors, and divesting hospitals in non-core markets, to $250 million. Tenet's hospital divestiture plan is expected to yield more than $1 billion in proceeds. A presentation published with the company's first-quarter financial results said Tenet re- ceived approximately $550 million from dives- titures in the first quarter of this year. In January, Tenet announced plans to sell St. Louis-based Des Peres Hospital to St. Luke's Hospital in Chesterfield, Mo. at transaction closed May 1. Tenet entered into a definitive agreement to sell its last two Philadelphia hos- pitals to American Academic Health System, an affiliate of El Segundo, Calif.-based Paladin Healthcare, in 2017, and the transaction was completed in January. In March, Tenet divest- ed MacNeal Hospital in Berwyn, Ill., and sold its minority interest in four Texas hospitals. n Private equity firm KKR buys Envision for $9.9B By Ayla Ellison N ew York City-based private equity firm KKR & Co. has entered a definitive agree- ment to acquire Envision Healthcare, a Nashville, Tenn.-based physician services provider, in an all-cash transaction for approximately $9.9 billion, including the assumption of debt. Here are four things to know: 1. Under the deal, KKR will acquire Envision for $46 per share, representing a 5 percent premium over Envision's closing price of $43.64 on June 8, according to The Wall Street Journal. 2. After dissapointing third quarter 2017 results, Envision's board reviewed a number of strategic alternatives. The board's outreach involved 25 potential hospital buyers, with KKR's proposal presenting Envision the best opportunity to enhance value for sharehold- ers. 3. The parties expect the transaction, which is subject to regulatory approvals, to close in the fourth quarter of 2018. Once the deal closes, Envision will become a private company and its stock will no longer be traded on the New York Stock Exchange. 4. KKR wasn't the only private equity firm interested in acquiring Envision. Sources told Reuters in May Washington, D.C.-based Carlyle Group and San Francisco-based TPG Global submitted bids for the company. Nashville, Tenn.-based HCA Healthcare was also reportedly interested in taking over Envision's ambulatory surgery division. n

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