Health Care Deal News: Spotlight on Hospitals

Sacred Heart Health System, an integrated delivery system in Northwest Florida with three hospitals and part of Ascension Health Alliance, is acquiring Bay Medical Center, a 323-bed hospital in Panama City. The purchase price is approximately $154.0 million; the deal is structured as a 40-year lease of the real property and an asset purchase agreement of the business. Bay Medical had been owned by a local hospital authority. This acquisition is being carried out as a joint venture between Sacred Heart Health System and LHP Hospital Group, Inc., which is providing capital for this transaction. This deal, valued at 0.6x revenue, will allow Bay Medical to retire all its $115.0 million in debt. It adds a fourth hospital to Sacred Heart’s facility network in Northwest Florida.

Steward Health Care System is buying its first long-term, acute care hospital, New England Sinai Hospital, a 212-bed LTAC in Stoughton, Massachusetts with satellite units at Tufts Medical Center and Carney Hospital. The purchase price of $37.0 million consists of $13.0 million in capital investment, $11.0 million to retire certain liabilities, $10.0 million to fund the hospital’s pension liabilities and $3.0 million in a line of credit. The deal is valued at 0.5x revenue. New England Sinai had launched the search for a partner in 2011. Since one of its satellite units is located at a Steward Health hospital, Carney Hospital in Dorchester, it is natural that management would consider partnering with Steward. Steward has been on a buying frenzy, but the company recently sold off a portfolio of 13 medical office buildings worth $100.0 million in a leaseback agreement with Healthcare Trust of America, based in Arizona. Proceeds from the transaction will be used for capital improvement in 10 of the hospitals Steward has purchased over the past two years.

Having fended off Community Health System’s (NYSE: CYH) hostile bid, Tenet Healthcare Corp. (NYSE: THC) appears to have started back down the path of divestment. It is selling Creighton University Medical Center-St. Joseph’s Hospital, a 334-bed acute care facility in Omaha, Nebraska, to Catholic Health Initiatives. THC is selling its 74% stake and Creighton University is selling its 26% stake. CHI’s Alegent Health is acquiring the facility, which includes 208 acute care and 157 psychiatric beds. American Medical International, a predecessor of THC, paid $100.0 million for the target facility in 1984. If the transaction is consummated, THC anticipates recognizing a pre-tax non-cash impairment charge of approximately $100.0 million. This deal gives Alegent its tenth area hospital.........Want to read more? Click here for a free trial to The Health Care M&A Information Source and download the current issue today