Friday, March 4, 2011

Bank of America (BAC) to Make $3 Billion on HCA Holdings Investment

HCA Holdings Inc. investors, including Bank of America (NYSE:BAC) will make almost $3 billion on a $1.2 billion investment in the health-care company in 2006. Other companies to enjoy the same return from the leverage buyout are Kohlberg Kravis Roberts & Co. and Bain Capital.

When measured over the 5-year period, it ends up being a return of around 250 percent.

New Dodd-Frank law rules wouldn't allow banks to make this type of investment now.

"The HCA deal grew from frustration of HCA executives, whose shares continued to stagnate despite healthy cash flows, share buybacks and increased dividends. HCA already had been taken private—and public—back in the late 1980s. This time, it was a more audacious undertaking, involving a half-dozen banks and the same number of equity investors. Just months before its July 2006 announcement, HCA had lowered its performance projections for the year, underscoring the dangers of the deal," said the Wall Street Journal.

Citigroup (NYSE:C) also invested in the venture, although at a much smaller level. Bank of America inherited the deal when they acquired Merrill Lynch, although another unit acquired a smaller portion of the company.





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