Bracing for the HCA IPO (HCA, BAC)

HCA is on deck for its IPO this week.  The IPO is expected to raise close to $3.5 billion from the sale of about 124 million shares.  Be advised that this is yet another huge private equity-backed IPO and this will mark the third time HCA will have gone public after a $32 billion going-private transaction in 2006 ($21.3 billion plus an additional $11.7 billion in assumed debt).  The shares are effectively being sold by private equity owners and this was one of our “Top 17 IPOs to Watch in 2011.”

HCA is the largest private hospital system in the United States with 164 hospitals and capacity of more than 40,000 beds and 104 freestanding surgery centers across 20 states.  It is also saddled with about $26 billion in debt.  Private equity sellers want to exit their positions and its underwriting syndicate is huge. In 2009, revenues were $30.052 billion, and net income was $1.054 billion.

About 97% of HCA is owned by Hercules Holding II, an entity owned by Bain Capital, KKR, and the private equity arm of Bank of America Corporation (NYSE: BAC).  The founding Frist family is also selling some shares as well.  It almost seems hard to imagine that a hospital system would want to come public again after the health care debates of 2009 and 2010.  Business is business.

We already had most of the data but Barron’s pointed out something this weekend that many investors may overlook or not consider as much as they should.  It noted that there are some 383 million more shares that will become eligible for resale after the six-month IPO lock-up expires.  We know that not all of those shares will come on the market, but some certainly will and that will affect the share price.

Another huge private equity-backed IPO is coming back on the market.

JON C. OGG