BAIT SHOP UPDATE: Triad Hospitals Acquired in Our Target Range

Triad Hospitals, Inc. (TRI-NYSE) has finally announced that it has entered into a definitive merger for an equity buyout offer at $50.25 per share in cash with affiliates of CCMP Capital Advisors and GS Capital Partners valued at approximately $6.4 billion, including approximately $1.7 billion of debt.  Its Board of Directors has approved the agreement and recommends that Triad stockholders approve the merger. All disinterested members of the Board voted in favor of the agreement, with the two inside directors abstaining.

This is a deal that we covered on January 23 (At What Price is a Triad LBO Doable)as one that makes sense and we had a $46.00 to $54.00 range that could still make sense, and even gave a likely range of $45.00 and $50.00 as the starting ranges.  We also updated it shortly after on an impatient basis by updating it with No Word Yet.  Did these guys read our range or did we have the range pegged?  Probably neither, but it came right in line with what made sense on paper.  You could still see some chasing up here in hopes for a higher bid, but if you bought in hopes of the buyout then it may make sense to at least take some of the profits here.  Since the deal isn’t subject to terms from the buyers and is chump change there is going to be a lower-risk of the buyers walking away.

The deal does have the normal caveats, although this sounds close as could be to being approved: The transaction is subject to certain closing conditions, including the approval of Triad’s stockholders, regulatory approvals and the satisfaction of other customary closing conditions. There is no financing condition to consummate the transaction. The transaction is expected to close promptly following the satisfaction of all closing conditions.  Triad can seek offers from third parties during the next 40 days and would be obligated to pay a $20 million break-up fee to CCMP Capital and GSCP and reimburse up to $20 million of their out-of-pocket expenses.  A $20 Million break-up fee sounds pretty low, so it possible that others might have an interest; but it may be too soon to call for a higher bid on what looks like an entrenched deal.

Jon C. Ogg
February 5, 2007

Jon Ogg is a partner in 24/7 Wall St., LLC and can be reached at [email protected] by email; if you wish to subscribe to our email newsletter regarding BAIT SHOP buyout candidates, IPO’s and other special situation investments please send an email and title it SUBSCRIBE.  This is offered at no charge for the time being.  We value privacy and do not share our email lists with any outside parties