Target: Portneuf Medical Center
Price: $150 million
Sponsor: CCMP Capital Advisors
Although a deal wasn’t expected for the first year of the platform, Legacy Hospital announced its debut joint venture on Feb. 2, a partnership with representatives of Bannock County, Idaho, and the Portneuf Health Care Foundation Inc., to operate Portneuf Medical Center, a regional medical center in Pocatello, Idaho. The deal calls for Legacy Hospital to provide $150 million for the project.
In addition, Legacy Hospital also has letters of intent out on two other projects—with the University of New Mexico Medical Group Inc. and the Hackensack University Medical Center, in New Jersey—and CCMP Capital is currently evaluating 15 to 20 other potential investments, Buyouts has learned. “We’re happy with the pipeline we have at this point,” said Ben Edmands, a managing director with the firm.
At the time it created Legacy Hospital in January 2008, CCMP Capital expected the platform to make three to four investments a year, with a goal of acquiring 20 facilities in five years.
This initial deal calls for Legacy Hospital to own a majority of the entity, which will be managed on an equal footing with the Portneuf Health Care Foundation. The transaction is being financed entirely with equity from CCMP Capital and
A central aspect of CCMP Capital’s original thesis in creating Legacy Hospital was that cash-strapped not-for-profit hospitals will need novel sources of capital. When it created the platform, the firm estimated roughly 85 percent of U.S. acute-care hospitals were not-for-profit, and of those, about half were struggling financially. Since then, turbulence in the municipal bond and auction-rate securities markets has only exacerbated problems for not-for-profit hospitals and the communities that rely on them. “The financing environment has dramatically increased the urgency for an alternative source of capital such as Legacy [Hospital],” said Kevin O’Brien, also a CCMP Capital managing director.
CCMP Capital does plan to layer in some debt as Legacy Hospital gains some scale, but when that happens depends on the pace of investments and the strength of the financing environment. Either way, the firm would only seek a conservative amount of leverage, and O’Brien expects Legacy Hospital to be an attractive business for lenders.
Though Legacy Hospital is the majority owner of the new medical center, directors of the Portneuf Health Care Foundation and Legacy Hospital will appoint the joint venture’s board of directors on a 50-50 basis. Under a voting arrangement called “block voting,” the board will need a majority of each side’s board to approve any measures. And the Foundation’s local board of representatives must approve any proposed CEO for the hospital and may terminate the CEO without the approval of Legacy Hospital’s board representatives.