HCA Kills Private Equity Overhang, BofA Raises Another $1.5 Billion (HCA, BAC)

HCA Holdings, Inc. (NYSE: HCA) is surging on news this morning that could be a very valuable lesson for private equity IPO situations.  The company is repurchasing a whopping 80,771,143 shares of HCA common stock from entities under Bank of America Corporation (NYSE: BAC).  The go-private deal clears out Merrill Lynch as a beneficial owner and most importantly it eliminates that huge overhang of stock that could have been sold into the open market.

HCA is repurchasing these shares at $18.61 per share and the deal is expected to close as soon as September 21, 2011. These shares represent approximately 15.6% of HCA’s total shares outstanding and the shares will no longer be outstanding after the is transaction.  The total transaction comes to just over $1.5 billion.

Following the repurchase, the three designees of Bank of America Corporation on HCA’s Board of Directors will step down.  Board members Forbes, Thorne and Birosak will also step down from the board of directors as a result of the transaction.

As far as the financing for this purchase, HCA said it will use a combination of cash on hand and with credit under its available credit facilities.  HCA even noted that it views this share repurchase as “an accretive investment in our company and an opportunity to enhance stockholder value.”

It often takes years for private equity backers to exit such a large position after such a large IPO.  While this is far from the peak after HCA’s woes, you could argue that Bank of America just raised another $1.5 billion in capital.

HCA shares are up just over 10.4% at $20.56 and the post-IPO range is $17.03 to $35.37.

JON C. OGG