Slattery takes $50m stake in US hospital firm

Co Clare businessman Domhnal Slattery has taken a $50 million (€38.09 million) stake in Hospital Corporation of America (HCA), the group bought for $33.5 billion in a record-breaking private equity transaction this summer.

Mr Slattery's personal investment vehicle Claret Capital entered the deal via the private equity arm of US investment bank Merrill Lynch, which co-funded the buyout with Kohlberg Kravis Roberts (KKR), Bain Capital and a co-founder of HCA, businessman Thomas Frist.

HCA is the largest private hospital operator in the US and manages some 5 per cent of all hospital admissions there.

The buyout was the largest private equity transaction in history when it was made public last July. However, the deal was eclipsed only a week ago when it emerged that private equity fund Blackstone was planning a $36 billion takeover of US real estate group Equity Office Properties.

Formerly linked to Guinness Peat Aviation, Mr Slattery made his money as a co-founder in 1995 of International Aircraft Management, which was acquired for a multimillion-euro sum in 2001 by Royal Bank of Scotland.

The dominant force behind start-up corporate jet company JetBird, Claret is known to control more than €300 million in assets. The company has significant property interests, but the HCA venture is its largest single investment to date. Among other holdings, Claret has also held stakes in car-rental group Hertz, the National Pizza Company franchise operator in the US, and Advantage Sales & Marketing.

The investments indicate Claret's war chest is of sufficient scale to secure entry into some of the biggest international syndicates at a time of rapid growth in the buyout sector. It was a co-investor in these companies with Merrill Lynch Global Private Equity, which has relationships with a small number of very high net worth equity providers.

The HCA buyout was heavily leveraged, with $28.2 billion in debt including $10.2 billion in assumed debt.

However, Claret is understood to have sourced the $50 million it invested from its own assets.

The company's money made up part of Merrill Lynch's $1.5 billion equity in the deal. KKR and Bain each invested $1.5 billion and members of the Frist family provided shares worth some $800 million.

Following completion of the transaction last week, the new owners are likely to hold the business for up to five years.

In a highly fragmented industry, HCA sees numerous opportunities for consolidation and cost reduction. Surplus and underused property is also likely to be sold off, in line with the strategy of many other private equity investors.

The deal valued the group at $51 per share. At 7.5 times earnings before interest tax depreciation and amortisation (EBITDA), the price was well below HCA's historic trading average of nine times EBITDA.

Claret Capital declined to comment.