In what sounds like a game of “can you top this,” The Blackstone Group reportedly is mulling a bid for hospital operator HCA to top the $21.3 billion offered by the private equity consortium of Bain Capital, Kohlberg Kravis Roberts and Merrill Lynch, potentially making the biggest buyout in history even bigger. The questions are why Blackstone is doing it, at what cost and is it worth it? Blackstone, reports The Wall Street Journal, is not thinking about going it alone, but it may have a hard time enlisting other p.e. firms, which maybe deferential to their peers and would decline to join the Big B. In addition, Blackstone would have to shell out between $10 million and $20 million to conduct due diligence, and if its bid came out on top, it would have to pay the then-losers a $300 million break-up fee. What’s more, the p.e. consortium has the opportunity to top the bid, and if that type of bidding war occurs, it would be reminiscent of the famed RJR Nabisco buyout, which held the buyout record until this one came along, in which KKR itself helped drive up the price – and which taught p.e firms a valuable lesson: a huge tag price does not a highly profitable deal make.
