HCA settles shareholder class-action lawsuit

Despite a few concessions made by the hospital giant, the settlement appears to be a fairly clear victory for HCA in its attempt to go private

Email | Print By Walker Duncan

Nashville-based hospital giant HCA announced late Wednesday that it has settled a number of class-action lawsuits seeking to block the proposed leveraged buyout of the company. According to a press release, the company’s attorneys have entered into a memorandum of understanding with the attorneys representing the various shareholder plaintiffs.

As a result of the settlement, Hercules Holding II, an entity formed by the investor group, agreed to put a $220 million cap on the termination fee it would receive if the merger was not consummated. Previously that figure had stood at $500 million.

Among the other bittersweet high points for the plaintiffs were provisions guaranteeing the shareholders’ right to protest the current buyout price of $51 per share, should they so choose. In addition, the voting hurdle has been raised, as the company will now need to receive a “yes” vote from a majority of shareholders, excluding Tommy Frist and others associated with him. Absent that majority, the shareholder plaintiffs will be allowed to reject the current settlement.

Another point of interest in the company’s SEC filing today was the agreement for Merrill Lynch to be paid a service fee of $35 million should the deal close pending shareholder approval on November 16. And the company says in the filing that it has decided to settle a number of shareholder derivative lawsuits, separately from the main settlement.

Resolution in the class-action cases remains contingent on approval from Davidson Co. Chancellor Ellen Hobbs Lyle, who last month denied a motion by the plaintiffs seeking to postpone the shareholder vote on the merger scheduled for next Thursday.

Some issues still remain in spite of today’s settlement. Whether HCA will pay the litigants' legal fees is a matter "subject to further negotiations," George Barrett, lead local attorney for the plaintiffs, told NashvillePost.com.

But for now, it seems that the road to buyout has become far less rocky for Frist and the rest of the investor group. As it stands, the only challenge remaining is the shareholders and the way they vote next week.