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Forstmann to Buy Operator of Hospitals for $1.37 Billion

June 11, 1996|From Associated Press

NEW YORK — Community Health Systems Inc., an operator of hospitals in smaller communities, has agreed to be acquired by the buyout firm Forstmann Little & Co. for $1.37 billion.

Community Health owns or operates 38 hospitals in 18 states, but most facilities are in the Southwest and Southeast. The deal, announced Monday, will take Community Health out of public hands.

The purchase will be Forstmann Little's first venture into health care.

"Community Health Systems has all the characteristics we look for in an acquisition: leading market position, significant growth potential and a great management team," Theodore J. Forstmann, the New York-based buyout firm's senior partner, said in a statement.

The companies said the transaction is not subject to antitrust review and is expected to be completed next month. Current management will remain in place, they said.

Forstmann touted Community Health's strategy of owning hospitals in communities with populations of 25,000 to 75,000 in which it can have either the town's only hospital or one of just two.

In Southern California, Community Health Systems owns Barstow Community Hospital in San Bernardino County.

Brentwood, Tenn.-based Community Health employs more than 7,900 health-care and other workers. Its stock closed up $8.50 at $51.875 on the New York Stock Exchange.

Forstmann Little, founded in 1978, makes its money buying companies and investing in them to increase their profitability. For the most part, the companies are sold afterward, though Forstmann has retained ownership stakes.

Among its current holdings are Gulfstream Aerospace Corp., a seller of corporate jets, and a 15% stake in General Instrument Corp., a producer of set-top cable TV boxes and other TV equipment.

It bought Ziff-Davis Publishing Co. for $1.4 billion in 1994 and sold it a year later for $2.1 billion.

The deal to buy Community Health was approved Sunday by the hospital company's board. Its terms call for Forstmann Little to buy all outstanding shares of Community Health stock for $52 a share in cash. Including outstanding options, that comes to about $1.1 billion. Assumed and refinanced debt total an additional $270 million. Forstmann said it will invest $1 billion of its capital in the deal and has arranged to borrow $900 million from Chase Manhattan Corp.

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