By Dan Primack
March 9, 2011

Hospital chain HCA Inc. (HCA) will return to the public markets this week, nearly five years after being taken private for $33 billion by KKR, Bain Capital and Merrill Lynch Private Equity. Pricing is scheduled for tomorrow night, with plans to offer 124 million shares at between $27 and $30 per share.

Nearly 30% of the shares are being offered by HCA’s private equity sponsors, who already have nearly recouped their initial $5.3 billion investment via a series of dividend recapitalizations. Moreover, those firms still will hold nearly a 70% equity stake post-IPO. In other words, the question of private equity profit on HCA is one of magnitude, not one of existence.

Less certain, however, is HCA’s health. The company took on massive debt to finance the original takeover, and even more debt via the recaps. So here’s a look at how pre-buyout HCA compares to post-buyout HCA. The following data is for year-end 2005 (the acquisition closed in November 2006), compared to year-end 2010 (during which time we had a recession, national healthcare reform, etc.):

Revenue
$24.46 billion before, $30.68 billion after

Assets
$22.3 billion before, $23.85 billion after

Debt
$10.48 billion before, $28.23 billion after

Working capital
$1.32 billion before, $2.65 billion after

Cash from operating activities
$3.16 billion before, $3.09 billion after

Hospitals
175 before, 156 after

Free-standing outpatient surgical centers
87 before, 97 after

Hospital admissions
1.65 million before, 1.55 million after

As you can see, the two main areas of difference are in revenue and company debt.

On revenue, the company credits such things as improved billing systems and lowering the provisions for doubtful accounts. It also appears to have emphasized growth of surgical centers over that of all-purpose hospitals.

As for debt, HCA says that it plans to use some of its anticipated $2.4 billion in IPO proceeds to pay down its leverage load, but does not any additional specifics. Even if all $2.5 billion went to debt reduction, there is still a very long way to go before HCA returns to its pre-buyout levels.

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