HCA Healthcare (HCA) has agreed to acquire the operations of Steward Health Care’s five hospitals in Utah. The financial terms of the deal have been kept under wraps.
Shares of the leading provider of healthcare services facilities in the U.S. that operates 187 hospitals and approximately 2,000 care centers have gained 103% over the past year. (See HCA stock chart on TipRanks)
The addition of Steward Health Care hospitals will strengthen and diversify HCA Healthcare’s existing mountain division portfolio, which comprises 11 hospitals in Utah, Idaho and Alaska.
The CEO of HCA Healthcare, Sam Hazen, said, “Utah is one of the fastest-growing areas in the country, and the state’s need for healthcare continues to increase.”
He added, “We believe the addition of these facilities will help us improve healthcare network options for patients and enable investment in services to meet the increasing demand for healthcare.”
Further, HCA has inked another agreement with hospital owner Medical Properties Trust, Inc. (MPW) to lease all of MPW’s Utah hospitals upon closing of the above transaction with Steward Health Care.
As per the terms of the 15-year master lease for the five Utah hospitals, the cash rent payable to MPW will be the same as the existing Steward master lease. Further, it includes five extension options of five years each, and rental payments will increase annually at CPI, subject to a 2% floor and 5% ceiling.
Additionally, from 2028, HCA Healthcare will have options to purchase the facilities from MPW at a purchase price not less than the fair value.
MPW purchased the Utah hospitals for $1.2 billion, and they represent around 5% of its total gross assets. Upon the completion of the agreement with HCA Healthcare, the percentage of Steward assets in MPW’s portfolio will decrease to nearly 17%.
Both transactions are expected to close in the first half of 2022, subject to certain approvals.
Recently, Cowen & Co. analyst Gary Taylor initiated coverage on HCA Healthcare with a Buy rating and a price target of $293 (12.8% upside potential).
Overall, the stock has a Strong Buy consensus rating based on 15 Buys and 3 Holds. The average HCA Healthcare price target of $273.89 implies 7.4% upside potential.
HCA scores a “Perfect 10” on TipRanks’ Smart Score rating system, indicating that the stock has strong potential to outperform market expectations.