Acute Care Portfolio Trades in $315M Deal

Capella Healthcare Inc. has completed the purchase of nine acute care facilities from Community Health Systems Inc. The transaction, valued at aggregate $315 million, involved a total of 1,070 beds located in Alabama, Arkansas, Missouri, Oregon and Tennessee. Capella and CHS, both headquartered in Franklin, Tenn., first announced the deal in late November of last year. “Each of these hospitals is located in a steadily growing market that offers potential for expansion of healthcare services,” Tom Anderson, president of Capella Healthcare, told CPN today. With four hospitals, Alabama is the site of the majority of the portfolio. The properties–Decatur’s Parkway Medical Center, Cullman’s Woodland Medical Center, Hartselle Medical Center in Hartselle, and Jacksonville Medical Center in Jacksonville–all sit within three hours north of Mobile, and under four hours northwest of Atlanta. Saint Mary’s Regional Medical Center and National Park Medical Center are in the respective Arkansas cities of Russellville and Hot Springs. The remaining hospitals include Mineral Area Regional Medical Center in Farmington, Mo.; Willamette Valley Medical Center in McMinnville, Ore.; and White County Community Hospital in Sparta, Tenn. CHS came into possession of four of the facilities–Jacksonville, St. Mary’s, National Park and Willamette Valley–last July when it acquired Triad Hospitals Inc. and its 50-property portfolio for $5.1 billion, plus the assumption of $1.7 billion in existing debt. The transaction was particularly significant for Capella, as it nearly tripled the company’s portfolio and allowed for its entrée into the Alabama, Arkansas, Missouri and Oregon markets. “Some areas are growing faster than others,” Anderson said. “For example, Willamette Valley Medical Center is located in what is commonly cited as the ‘next Napa Valley region.’ Also in a high growth area, National Park Medical Center is located in Hot Springs, Arkansas, a rapidly expanding retirement community.” Capella relied on equity capital from its partner, GTCR Golder Rauner to fund part of the acquisition. The remaining funds came in the form of debt financing from a group consisting of Citigroup Global Markets Inc., Banc of America Securities L.L.C. and GE Capital Markets.Founded in 2005, Capella now operates 14 general acute care hospitals in non-urban communities in seven states. The company has total capital resources of approximately $1 billion. CHS is an operator of general acute care hospitals in non-urban and mid-size markets across the United States. Its portfolio of owned, leased or operated properties encompasses 116 hospitals in 28 states. CHS stock opened at $31 today.