Hospital operator HCA Holdings Inc. expects to make about $2.4 billion from what could become the largest U.S. private equity-backed initial public offering of stock.
The Nashville, Tenn., company plans to offer a total of about 124 million shares priced at between $27 and $30 per share, according to an amended registration statement filed Tuesday with the Securities and Exchange Commission. HCA will sell more than 87.7 million shares, while selling stockholders will offer more than 36.3 million. The company will use proceeds from its shares to pay down debt.
If successful, the roughly $3.53 billion IPO would top the $2.86 billion raised recently by an IPO from pipeline company Kinder Morgan, which was able to sell more shares at a higher price than it anticipated. Last month Nielsen Holdings NV's IPO raised $1.9 billion, which was then a record for a private equity-backed company.
The market appears to be warming up to private-equity IPOs, said David Menlow, president of the research group IPOfinancial. But he doesn't expect that trend to last due to investor concern over proceeds going to private equity sponsors and not the company.
"Offsetting that is the magnitude and power of the HCA name," he said. "I think this is a natural draw for the institutional markets.
"They know this company is somewhat of a cash cow."
HCA operates 164 hospitals and 104 surgery centers. Earlier this month, the company said it also was creating a new subsidiary to sell supply chain management and other services to healthcare companies.
It made $1.21 billion, or $2.76 per share, last year on $30.68 billion in revenue. But the company also warned that it is highly leveraged. Its long-term debt totaled more than $28 billion as of Dec. 31.
Menlow said that debt will be "somewhat of a mini shocker" for people who haven't previously examined the company's financials. But he added that investors who look into it will realize HCA is doing well and will have the ability to pay down its debt.
The IPO will mark the third time HCA has gone public. It first did so in 1969, then went private and re-emerged as a public company in 1992. In 2006, a group of investors including Bain Capital, Kohlberg Kravis Roberts and Merrill Lynch Global Private Equity took the company private again in a $21 billion leveraged buyout.
The company plans to list its stock on the New York Stock Exchange under the ticker symbol "HCA."
Shares are expected to begin trading next month, according to John Fitzgibbon, who tracks IPOs at IPOScoop.com.
BofA Merrill Lynch, Citi and J.P.Morgan are the lead underwriters of the offering. Underwriters will have an option to purchase an additional 18.6 million shares to cover any excess demand.
HCA first filed a registration statement detailing its IPO plans last spring with the Securities and Exchange Commission. It amended the statement in December but did not spell out how many shares it would offer or the expected price range.