Bank of America Corp., the lender that's divesting assets to raise capital, agreed to sell 80.8 million shares of HCA Holdings Inc. back to the health-care company for $1.5 billion. HCA's stock jumped 10 percent.
The agreement calls for a price of $18.61 a share, yesterday's closing price, according to a statement today from HCA, the largest U.S. hospital operator. The shares equal a 15.6 percent stake in HCA, the Nashville, Tennessee-based firm said.
"It's consistent with our strategy of focusing on our core businesses, building liquidity and strengthening the balance sheet," said Jerry Dubrowski, a Bank of America spokesman. "Our customers do not choose to do business with us because we have an investment in a health-care provider."
Brian T. Moynihan, chief executive officer of the biggest U.S. lender by assets, has sold at least $40 billion of assets and preferred shares ahead of stricter international rules on capital levels. The Charlotte, North Carolina-based firm's shares have declined by more than 45 percent this year on concern that costs from soured mortgages would force Moynihan to sell new stock to raise capital.
Merrill Lynch & Co., the securities firm acquired by Bank of America in 2009, made the original private-equity investment in HCA for about $1 billion in 2006, Dubrowski said. Counting the sale announced today, dividends and an initial public offering, the bank had $3 billion in proceeds from that investment, he said.
"We've made no secret that we're not long-term players in the private-equity field," Dubrowksi said. Ed Fishbough, an HCA spokesman, wouldn't comment on who initiated the repurchase.
The sale reduces assets that will be penalized under rules set by the Basel Committee on Banking Supervision, Dubrowski said. Last month, Bank of America agreed to sell about half its stake in China Construction Bank Corp. for a $3.3 billion gain.
Bank of America rose 13 cents, or 1.8 percent, to $7.18 at 11:25 a.m. in New York Stock Exchange composite trading. HCA surged $1.92 to $20.52.
The repurchase of shares presented an opportunity for HCA to boost earnings, said Art Henderson, an analyst at Jefferies & Co. in Nashville, Tennessee. He said the move should add about 40 cents a share to earnings on an annualized basis, with 10 to 11 cents of that realized in the second half of the year.
"This was a more accretive opportunity than going out and making an acquisition," Henderson said in a phone interview. "It also gives management a chance to send a signal to the market that the selloff in the stock has been overdone."
Shares of HCA have been pummeled since June on investor concern over a decline in hospital revenue caused by the economic slump and cuts in Medicare and Medicaid payments. The company reached a high for the year on June 9 and has dropped 47 percent since then through yesterday's close.
HCA's IPO in March raised $3.79 billion, the largest amount for a private equity deal. KKR & Co., Bain Capital LLC and Bank of America were investors. Bank of America's shares were outstanding from the original $33 billion leveraged buyout in 2006. Including debt, it was the biggest buyout at the time.
The transaction announced today is expected to be completed on Sept. 21, HCA said. Three HCA board members that were designated by Bank of America will step down, the hospital operator said.