NEW YORK (Reuters) – Hospital operator HCA Inc, backed by buyout firms Bain Capital and Kohlberg Kravis Roberts & Co (KKR.AS), on Friday filed for an initial public offering of up to $4.6 billion, the biggest buyout-backed offering since the financial crisis began nearly three years ago.
The filing comes as IPOs around the world are being canceled as fear over Greece’s deepening debt crisis and a sudden drop in U.S. stocks on Thursday rattled markets. Stock markets continued to fall on Friday.
The HCA IPO will be the largest private-equity backed flotation since the financial meltdown, according to Thomson Reuters data, and is the latest evidence that private equity firms are again able to exit investments made during the boom.
HCA was bought in November 2006 in a $21 billion deal by a consortium that also included Bank of America, Citigroup Inc, and HCA’s founder. In January it announced plans to pay its owners a $1.75 billion dividend.
KKR also took its discount retailer Dollar General Corp (DG.N) public in November in an offering that raised about $716 million.
Other IPOs are waiting in the wings, such as KKR and Bain’s retailer Toys R Us, sources previously told Reuters. Another of KKR and Bain’s investments, Dutch semiconductor company NXP Semiconductors N.V., filed for an offering of up to $1.15 billion in April.
The HCA IPO will include about $4 billion shares to be sold by the company and existing shareholders, while about $2.5 billion will consist of newly issued shares sold by HCA.
“There is a real dearth of a large market capitalization vehicle in the hospital space for large mutual fund investors to invest in,” said CRT Capital Group analyst Sheryl Skolnick.
“The opportunity to have a stable, well-run company in the public marketplace is attractive to them,” Skolnick said.
The passage of the new health reform law means adding potentially millions more insured customers for hospitals, which have been weighed down by unpaid patient bills from patients lacking sufficient insurance.
“Waiting for reform means that they get a higher multiple,” Skolnick said. “It’s that simple.”
“There may be some concerns that they are not raising enough through primary shares,” Skolnick said referring to the expected proceeds to the company of $2.5 billion out of the $4.6 billion being raised.
“The flip side of that is if the insiders, the private equity firms, don’t sell stock, then it’s just an overhang,” Skolnick said.
HCA said it operates 162 hospitals with approximately 41,000 beds, and 106 freestanding surgery centers across 20 states in the United States and in England.
For the three months ended March 31, it said it generated revenues of $7.5 billion, slightly higher than the $7.4 billion the same time a year ago, and net income of $388 million compared with $360 million a year earlier.
BANKS LINE UP
The deal will be underwritten by a roll-call of Wall Street banks, led by Bank of America Merrill Lynch (BAC.N), Citigroup (C.N) and JPMorgan (JPM.N).
Other banks also listed are Barclays Capital, Credit Suisse (CSGN.VX), Deutsche Bank (DBKGn.DE), Goldman Sachs & Co, Morgan Stanley (MS.N) and Wells Fargo.
HCA said its proposed ticker on the New York Stock Exchange will be “HCA”.
As well as being able to exit investments, private equity firms are also seeing dealflow return.
Three big private equity firms, Blackstone Group (BX.N), Thomas H. Lee Partners and TPG Capital [TPG.UL], have teamed up to bid for Fidelity National Information Services Inc (FIS.N), sources familiar with the situation said on Thursday.
If completed, it would rank as the biggest leveraged buyout since the financial crisis hit. (Reporting by Megan Davies and Lewis Krauskopf, additional reporting by Clare Baldwin, editing by Dave Zimmerman)