Community Health trumps private bid for Triad Hospitals

Community Health Systems Inc. said Monday it has agreed to buy Triad Hospitals Inc. for about $5.1 billion plus $1.7 billion in debt, topping a previous bid by private-equity buyers.

Community Health said the deal would make it the nation's largest publicly traded hospital company. It would own or operate about 130 hospitals in 28 states and control more than 18,700 beds.

Franklin, Tenn.-based Community Health agreed to pay $54 per share, the companies said.

Triad, based in the Dallas suburb of Plano, had previously agreed to be taken private in a $4.7 billion sale, or $50.25 per share, to an affiliate of Goldman Sachs and a JPMorgan Chase & Co. spinoff.

Shares of Triad rose $2.60, or 5.3 percent, to $51.96 in afternoon trading on the New York Stock Exchange after hitting a 52-week high of $52.20. Community Health shares fell $1.13, or 3.1 percent, to $35.67.

The Triad transaction comes after hospital giant HCA Inc. was sold to private owners for $21.3 billion.

Hospitals are struggling with flat volumes and more unpaid bills from uninsured patients.

Triad signaled last fall that a sale was likely. The stock has slumped since mid-2005, and its largest shareholder, hedge fund TPG-Axon Capital Management LP, has accused Triad of "remarkably poor financial analysis" and failing to say how it would fix the company.

Triad said it paid a breakup fee to cancel its earlier deal with GS Capital Partners and CCMP Capital Advisors but didn't disclose the amount. If Triad was negotiating with Community by Friday, the fee could be up to $40 million; otherwise; it could be $120 million, according to a Triad regulatory filing.

Community Health is smaller than Triad by many measures, including beds and annual revenue — $4.37 billion at Community in 2006, versus $5.54 billion for Triad. Both favor small towns where there is less competition.

Triad has 53 hospitals in the West and South and another under construction. The company also provides hospital management and consulting services.

Triad's board recommended that shareholders take the Community Health offer. Two inside directors abstained. If approved by Triad shareholders and regulators, the deal is expected to close in the third quarter.

There is no financing condition to the sale. Community Health said it has lined up financing commitments from Credit Suisse and Wachovia Capital Markets LLC.

Wayne T. Smith, chairman, president and chief executive of Community Health, said the acquisition would increase his company's size and geographic diversity.

"This acquisition complements our rural strategy by adding mid-size markets in great locations," Smith said.

Community Health said it was withdrawing previous comments about its financial performance for 2007. Last month, the company said it expected to earn $2.30 to $2.38 per share on revenue of about $5 billion in 2007. Company officials said they planned to acquire three or four hospitals this year.

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