| NEW YORK
NEW YORK Nov 13 Buyout firms Apollo Global
Management LLC and Thomas H. Lee Partners LP are
interested in buying hospital operator Capella Healthcare from
its private equity owner, according to several people familiar
with the matter.
Chicago-based buyout firm GTCR LLC hired Bank of America
Merrill Lynch to explore a sale of the Franklin,
Tennessee-based hospital operator, in a deal that is expected to
fetch less than $1 billion, Reuters reported in September.
Apollo and THL submitted first-round offers for Capella, the
people said this week, asking not to be named because the matter
is not public. It could not be determined if other firms besides
Apollo and THL are involved in the sale process.
Several other private equity firms as well as hospital
operators considered a deal for Capella but decided against it,
the people added.
Representatives for Capella, Apollo, Thomas H. Lee and Bank
of America declined to comment. A GTCR spokeswoman did not
respond to a request for comment.
GTCR first invested in Capella in 2005, according to
Capella's website. The company operates 14 hospitals in rural
areas of the United States including Arkansas and Tennessee.
Capella has more than $100 million in earnings before
interest, tax, depreciation and amortization and GTCR is hoping
to get a little less than $1 billion for the sale, Reuters
There is, however, a substantial price gap with the private
equity bidders and it remains unclear if the buyout discussions
will result in a deal, the people cautioned.
Hospital operators are increasingly looking to grow through
acquisitions as they seek to gain leverage in negotiations with
health insurers and reinforce their presence in local markets,
and as they brace for diminishing payments from government
programs such as Medicare and Medicaid.
In June, third-largest U.S. hospital chain, Tenet Healthcare
Corp, said it was buying Vanguard Health Systems Inc for
In July, Community Health Systems Inc, the
second-largest for-profit U.S. hospital operator, announced
plans to acquire Health Management Associates in a deal
valued at $3.6 billion. That agreement was just approved by
HMA's new board of directors Wednesday.
(Additional reporting by Greg Roumeliotis in New York; Editing
by Lisa Shumaker)