Looking Back

When HCA Inc. was acquired in November 2006, the buyout represented the largest deal of the year (and at the time, the largest LBO in history). The operator of hospitals in the United States and England was acquired for $32.1 billion by a consortium made up of Bain Capital, Kohlberg Kravis Roberts & Co. and Merrill Lynch Global Private Equity.

Unlike many mega-buyouts of the era, HCA’s senior management remained in place post-close. However, in less than two months, Chairman and CEO Jack Bovender plans to begin his transition away from the company amid weakening results.

Bovender will retire from his position as CEO effective Dec. 31, 2008, according to a regulatory filing. Bovender will keep his post as executive chairman until Dec.15, 2009, at which time he will resign that position as well. In conjunction with Bovender’s retirement, Richard Bracken will pick up as president and CEO of HCA effective Jan. 1, 2009. Bracken has served as president and COO of HCA since Jan. 2002; he began his career with HCA more than 25 years ago, in 1981.

So how to evaluate what this changing of the guard means for HCA? Judging by the numbers, it may be a good thing. In the six months ended June 30, 2008, HCA generated $14.1 billion on revenue, up from 13.4 billion the year before. However, adjusted EBITDA for the first half of 2008 was $2.3 billion, down from $2.5 billion for the same time in 2007.

The big price paid for HCA back in 2006 has to be viewed at least in part as a function of the environment in which the deal was struck. Just a few months later, in February 2007, an investment group including Kohlberg Kravis Roberts & Co. and TPG Capital would agree to pay $45 billion for TXU Corp., which remains the largest completed LBO on record. But still, based on the latest financials, it’s hard to make an argument that the HCA deal has been a success from an execution standpoint either.

The 63-year-old Bovender began his hospital administrative career in 1969 as a lieutenant in the U.S. Navy. Early highlights in his private sector career include stints as CEO of Medical Center Hospital in Largo, Fla. and West Florida Regional Medical Center in Pensacola, Fla.—both owned at the time by HCA. From 1985 to 1992, Bovender held several senior-level positions with HCA proper, including president of the company’s Atlanta Division and president of HCA’s Eastern Group Operations. In 1992, he was named executive vice president and COO of HCA, and in 1999 he was given a seat on the company’s board of directors. So basically, he’s a guy with a wealth of institutional knowledge that played a huge part in creating the value that led to that historic bounty from private equity. What his more recent legacy will be remains to be seen.