By Jennifer L. Boen, The News-Sentinel, Fort Wayne, Ind.
Mar. 20–In an 11th-hour change of plans, Triad Hospitals Inc. (TRI), parent company of Fort Wayne-based Lutheran Health Network, will be owned by Community Health Systems Inc. of Franklin, Tenn. Officials from both companies announced the deal Monday.
If the $6.8 billion sale is approved by Triad stockholders and meets all federal regulations, it will create the largest publicly traded hospital company in the nation, according to Community Health Systems officials. Community Health Systems (CHS) will pay $54 per share in cash for Triad stock.
In early February, Triad announced the company would be purchased by two private equity firms: CCMP Capital Advisors, a division of JPMorgan Chase, and GS Capital Partners Fund, a division of Goldman Sachs. They had agreed to buy Triad for $6.4 billion, or $50.25 per share, and take the company private, but the agreement allowed for other offers to be considered within the next 40 days.
Lutheran Health Network operates Lutheran, Dupont and St. Joseph hospitals and the Rehabilitation Hospital in Fort Wayne; Kosciusko Community Hospital in Warsaw; Bluffton Regional Medical Center; and Dukes Memorial Hospital in Peru. Community Memorial Hospital in Hicksville, Ohio, is affiliated with the network but not owned by Triad.
Tom Miller, regional president for Lutheran Health Network and CEO of Lutheran Hospital, referred to Monday’s announcement as a “merger of Triad with CHS.” In reviewing the network’s history, he said with each new ownership change, “we’ve been a stronger hospital. Lutheran Health Network is really doing well,” he said.
Lutheran Hospital was first owned by 34 northeast Indiana Lutheran churches, which sold the hospital in 1995 to Quorum Health Services of Brentwood, Tenn. Quorum bought St. Joseph Hospital in 1998 from the Poor Handmaids of Jesus Christ, a Catholic religious order. Then in 2001, the year Dupont Hospital opened, Triad purchased Quorum.
Terms of the sale of Triad include CHS assuming $1.7 billion of Triad debt, bringing the actual cash purchase price to $5.1 billion.
The February agreement called for a $20 million termination fee to be paid to CCMP and GS. CHS officials said in a Webcast news conference Monday that a termination fee will be paid, but they would not disclose the amount.
“The transaction with CHS validates Triad’s strategy, and I am proud of the value this brings to our shareholders,” James D. Shelton, chairman and CEO of Triad, said in a statement. “We look forward to working to ensure a smooth transition for our communities.”
A special committee composed of disinterested members of Triad’s board of directors unanimously approved the acquisition by CHS. Approval now will go before the company stockholders.
According to CHS, financing for the purchase has been approved by Credit Suisse, Wachovia Capital Markets LLC and some of their affiliates.
CHS owns, leases or operates 77 hospitals with 9,117 beds in 22 states. Acquiring Triad will give CHS a presence in six more states. When the deal is completed, which is expected to take place by the third quarter of the year, it will give CHS 18,700 beds in its hospitals.
Triad has 54 hospitals and 13 ambulatory surgery centers in 17 states and also provides, through its subsidiary QHR, hospital management, consulting and advisory services to more than 170 independent community hospitals and health systems. Triad hospitals have a combined 9,614 beds.
According to CHS’ Web site, the company is the nation’s leading operator of general acute-care hospitals in nonurban communities. In more than 85 percent of its markets, CHS-affiliated facilities are the sole health-care provider, with most hospitals having under 100 beds.
Although CHS owns a third more hospitals than Triad, CHS’ revenue in 2006 was $4.4 billion, compared with Triad’s $5.5 billion, according to information provided by company officials.
Miller said the 6,000 employees of Lutheran Health Network and the network’s patients will see no changes in local operations.
“Health care is going to be perceived as local. I’ll be here and Mike Schatzlein will be here,” he said. Schatzlein is chief operating officer of Lutheran Health Network and CEO of Dupont Hospital. “I don’t anticipate any changes.”
At Monday’s closing of trading on the New York Stock Exchange, CHS stock fell $2.02 or 5.49 percent to $34.78. Triad shares rose $2.59, or 5.25 percent, to close at $51.95.
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Copyright (c) 2007, The News-Sentinel, Fort Wayne, Ind.
Distributed by McClatchy-Tribune Business News.
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