2 Midstate hospital companies to merge in $1.13 billion deal

Email | Print By David A. Fox

08-16-2004 7:34 AM — LifePoint Hospitals (LPNT) will acquire Province Healthcare (PRV) next year for $1.125 billion plus the assumption of nearly $600 million of debt, the Brentwood hospital companies announced Monday morning. The half-cash, half-stock deal equates to $22.66 a share for Province shareholders, whose stock last traded Friday at $13.61 and which was up 49% in pre-opening trading Monday to $20.28.

The combined company will span 50 hospitals and generate $1.7 billion in annual revenue. The transaction is expected to close in the first half of 2005 and add 3.5% to LifePoint per-share earnings.

Province shareholders will receive $11.375 in cash and roughly the equivalent in new LifePoint shares. For each Province share, stockholders will receive .3447-.2917 LifePoint shares if LifePoint shares average price is $33-$39. If LifePoint shares average above $39, the exchange ratio is .2917. If LifePoint shares average less than $33, the exchange ratio is .3447. In the stock exchange, 17.1 million new LifePoint shares will be issued.

Citigroup is financing the cash portion of the transaction and providing for other capital needs via term loans of up to $1.325 billion and up to $400 million in revolving loans.

The transaction will reduce LifePoint's concentration of facilities in such states as Tennessee and Kentucky, LifePoint CEO Ken Donahey noted in a press release. It also will afford $15 million to $18 million in cost savings over the first 18 months.

Province was created by Golder, Thoma, Cressey, Rauner and CEO Marty Rash in 1996, before merging with Brim Inc. and conducting an initial public offering in early 1998. Investors who bought Province shares on the IPO paid a split-adjusted $7.10 a share. The sale to LifePoint should confer average annual gains of 18% to LifePoint's original IPO subscribers.

LifePoint shares settled Friday at $32.74. Their 52-week range is $22.51-$39.21.

The companies will conduct a conference call Monday morning at 9:30 a.m. that will be carried on the Web at www.lifepointhospitals.com.