(Reuters) - HCA Holdings Inc, one of the largest U.S. hospital chains, has agreed to pay $215 million to settle a shareholder class action lawsuit over its $4.35 billion initial public offering in March 2011, attorneys for the shareholders announced on Wednesday.
The settlement resolves allegations that the company concealed poor growth prospects and the fact that it routinely performed unnecessary cardiac procedures, according to Darren Robbins, the shareholders’ lead attorney.
Robbins said he was “very pleased” with the settlement.
“While we believe the allegations were without merit, we also believe that eliminating the risk, cost and distraction of the litigation is in the best interest of our shareholders,” HCA spokesman Ed Fishbough said in a statement.
The settlement must still be approved by U.S. District Judge Kevin Sharp in Nashville, Tennessee federal court, who is presiding over the lawsuit.
HCA’s IPO had been the largest by a company owned by private equity firms. HCA had been taken private in 2006 by a group led by Bain Capital, Kohlberg Kravis Roberts and Merrill Lynch’s private equity arm.
The shareholder lawsuit alleged that HCA, its directors, its private equity owners and its investment banks hid unfavorable trends from investors, including falling revenue from Medicaid patients, and improperly accounted for a 2006 accounting and 2010 restructuring.
Shareholders also alleged that HCA hid the fact that it was being investigated by the U.S. Department of Justice for doing unnecessary cardiac procedures, which ultimately led it to curtail those procedures and lose revenue.
The shareholders said that by the time HCA was sued on Oct. 28, 2011, after additional disclosures, HCA’s share price had fallen as much as 43 percent from its $30 IPO price.
The class, which Judge Sharp certified in September 2014, includes shareholders from the March 9, 2011 IPO to Oct. 28, 2011.
The case had been scheduled to go to trial in January.
The case is Schuh et al v. HCA Holdings Inc et al, U.S. District Court, Middle District of Tennessee, No. 11-01033.
Reporting By Brendan Pierson in New York; Editing by David Gregorio
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