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Private Equity Giant Apollo Snaps Up Hospital Chain For $5.6B

RCCH HealthCare Partners, which is owned by Apollo Global Management, has inked a deal to acquire LifePoint Health, a chain of rural hospitals headquartered in suburban Nashville.

Apollo is paying $5.6B for the healthcare company, which will be taken private once the deal is complete.

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The deal is the latest in a wave of consolidation throughout the healthcare industry. Deloitte expects that only half of the non-government health systems — a total of 1,833 in 2014 — will exist by 2024, and there will be no independent hospitals in 2024.

Just last month, another major private equity player, KKR, paid $5.5B to acquire another Nashville company, Envision Healthcare Corp., which provides physician services to hospitals and owns healthcare properties.

Such consolidation is expected to beef up healthcare hubs, of which Nashville happens to be one.

"For Nashvillle, long term, it just gives us larger companies with greater scale," Nashville Health Care Council President Hayley Hovious told the Tennessean.

The combined entity of RCCH and LifePoint will continue under the LifePoint name. The company will operate 84 non-urban hospitals in 30 states totaling more than 12,000 beds, as well as regional health systems, physician practices, outpatient centers and post-acute service providers. In most of the markets LifePoint serves, it will be the only community healthcare provider.

Post-acquisition, LifePoint's projected revenues will be $8B/year. The company will oversee about 7,000 affiliated physicians and 60,000 employees overall.

Under the terms of the deal, which was unanimously approved by the LifePoint board of directors, LifePoint may actively solicit alternative acquisition proposals until Aug. 22. Until then, the company will be mum about the process, unless the board accepts a better offer.

Barclays, Citigroup, RBC Capital Markets and Credit Suisse are providing financing for the acquisition. PSP Investments Credit USA LLC and an affiliate of Qatar Investment Authority have committed to provide a portion of the debt financing. The financing also includes an equity contribution from funds managed by Apollo.

The purchase price of $65/share represents a premium of about 36% over LifePoint’s closing share price on July 20, the last trading day before the announcement.