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Acquisition as structured, petitioners must possess an equity
interest in HealthTrust equal to approximately 15 percent of the
total transaction. The amount stated for the Securities,
therefore, represented the residue after subtracting from the
purchase price the cash consideration HealthTrust would pay HCAII
and the HCA debts HealthTrust would assume. HCA Management
considered the $2.1 billion stated purchase price to be a full
but fair price for the Facilities.
The Supplement and Amendment to the Purchase and
Reorganization Agreement
During April and May 1987 the operating results of the
Hospitals reflected a decline in financial performance.
Subsequently, sometime between May 30, 1987, and July 1987,
Drexel Burnham Lambert Incorporated (Drexel), an investment
banking firm retained by petitioner to arrange financing for the
reorganization, advised petitioners that, because of the decline,
it would be difficult to place the debt securities to be used as
part of the Acquisition, and, accordingly, the debt to be placed
on HealthTrust would have to be reduced from $1.8 billion to $1.6
billion. The lenders also required that certain other changes be
made to the Original Agreement.
Consequently, on September 17, 1987, HCA, HCAII, and
HealthTrust executed a Supplement and Amendment to the Purchase
and Reorganization Agreement (Amended Agreement) to change the
composition of the consideration to be paid for the Subsidiaries.
The principal changes in the Amended Agreement were that (a) the
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