Nevada, regional hospitals included in merger

Monday, Aug. 16, 2004 | 10:47 a.m.

SUN STAFF AND WIRE REPORTS

BRENTWOOD, Tenn. -- LifePoint Hospitals Inc., which owns medical centers mainly in the U.S. Southeast, agreed to buy Province Healthcare Co. for about $1.13 billion in cash and stock to gain 22 hospitals in rural communities.

Province's 75-room Northeastern Nevada Regional Hospital in Elko is the only Nevada hospital affected by the deal. Closer to Las Vegas, Province owns or is building hospitals in Lake Havasu City and Fort Mohave, Ariz.; and in Blythe and Needles, Calif. The closest LifePoint hospitals to Las Vegas are in northeast and central Utah.

The purchase values Province Healthcare at $22.66 a share, a 66 percent premium based on Friday's closing stock prices, the Brentwood, Tenn.-based companies said today in a statement. Debt assumption brings the total price to about $1.7 billion.

The combined company will have 50 hospitals in 19 states, reducing LifePoint's reliance on operations in Kentucky and Tennessee, Chief Executive Officer Kenneth Donahey said during a call with investors and analysts. LifePoint, spun off by HCA Inc. in 1999, said 47 of the hospitals will be the sole operators in their communities. Revenue will almost double to $1.7 billion.

"The companies have very similar business strategies," Frank Morgan, an analyst with Jefferies & Co. in Nashville, Tenn., who rates both companies "hold" and doesn't own their shares, said in a telephone interview. "A lot of people thought these two would ultimately get together."

LifePoint and Province both own hospitals that serve communities with populations of about 100,000 or less, Morgan said. The companies add programs and staff to keep local patients from going to larger urban medical centers, he said.

The purchase increases the number of states where Lifepoint operates by 10, and halves the percentage of total revenue that comes from Kentucky hospitals to 17 percent from 34 percent, Donahey said. In addition to 20 hospitals in operation, Province is building two new ones in Fort Mohave, Ariz., and Hardeeville, S.C., he said.

"We plan on continuing to acquire hospitals," Donahey said on the conference call. "We're poised to grow in existing and new markets."

Coastal Carolina Medical Center, under construction about 20 miles from Hilton Head in Hardeeville, is scheduled to open before the end of the year, according to Province's Web site.

The combined company's sales will rank behind those of rural hospital operators Community Health Systems Inc., which had $2.83 billion in 2003 revenue, and Health Management Associates Inc., which had $2.56 billion.

The purchase will result in annual cost savings of $15 million to $18 million and immediately add to earnings, LifePoint said. The companies expect the transaction to close in the first half of 2005.

LifePoint has a commitment from Citigroup Inc. for as much as $1.325 billion in term loans and as much as $400 million in revolving loans. The money will be used to fund the cash portion of the acquisition, refinance Province Healthcare's debt and provide for working capital and general corporate needs, LifePoint said in the statement.

LifePoint's hospitals are in Alabama, Florida, Kansas, Kentucky, Louisiana, Tennessee, Utah, West Virginia and Wyoming, according to the company's Web site. Province also owns and operates hospitals in Alabama and Louisiana, as well as Arizona, California, Colorado, Indiana, Mississippi, Nevada, New Mexico, Pennsylvania, Texas and Virginia, according to the company's Web site.

Bloomberg News contributed to this report.