Triad agrees to $5.1 billion Community Health offer

By Kim Dixon

CHICAGO (Reuters) - Triad Hospitals Inc. (TRI.N) has agreed to be bought by Community Health Systems Inc. (CYH.N) for $5.1 billion in a deal that will create the biggest publicly traded U.S. hospital chain, the companies said on Monday.

Triad shareholders will receive $54 per share, a 9.4 percent premium over the stock's closing price on Friday. Including $1.7 billion of assumed debt, the deal is worth $6.8 billion.

The deal tops a $4.7 billion agreement announced six weeks ago for Triad to be purchased by CCMP Capital Advisors LLC and Goldman Sachs Capital Partners, the private equity arm of Goldman Sachs Group Inc. (GS.N).

Deal-making in the hospital sector has been led by private equity groups, which have taken advantage of relatively low valuations and a motivation by management to escape quarterly scrutiny by Wall Street amid a weak operating environment.

The No. 1 U.S. hospital chain, HCA Inc., went private in a $22 billion management-led buyout last year.

Several analysts, though, were surprised by the Triad- Community marriage, saying they wanted to see proof of the cost savings and efficiencies that would justify the premium being paid by Community.

"It's obviously a premium to not just the previous bid but, by my calculations, to the HCA transaction, for what is clearly lower-quality assets," Balaji Gandhi, an analyst at Oppenheimer said.

Community Health executives on a conference call said the deal would reduce earnings in 2008, but would be likely add value in 2009. It expects $40 million to $50 million in operating cost savings in its first full calendar year. The deal will be entirely financed through debt.