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1997. During December 1988 and January 1989, HealthTrust
repurchased for $28.875 per share substantially all of the Common
Stock initially purchased by HealthTrust Management. The
purchase price was paid by reducing the amount of the promissory
notes. On January 31, 1989, HealthTrust canceled the remaining
indebtedness of HealthTrust Management and paid them additional
compensation to cover the taxes on the income resulting from the
debt cancellation and the payment of that additional
compensation.
The Goldman Sachs Valuation
During 1987, petitioners retained the investment banking
firm of Goldman, Sachs & Co. (Goldman Sachs) to provide a
fairness opinion as to whether the consideration to be received
for the Facilities was fair. Accordingly, Goldman Sachs
evaluated the fair market value of the Securities. In a report
dated February 2, 1988 (Goldman Sachs Valuation), Goldman Sachs
concluded that the fair market value of the class A preferred
stock was within a range of $152 million to $168 million
(midpoint, $160 million), that the fair market value of the class
B preferred stock was within a range of $97 million to $108
million (midpoint, $102 million), and that the fair market value
of the Common Stock Warrants was within a range of $22 million to
$52 million (midpoint, $37 million). Goldman Sachs stated
further that it would not be unreasonable to use the midpoint of
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