NASHVILLE, Tenn. -- Columbia/HCA Healthcare Corp. will create two employee stock ownership plans with a total estimated value of $62 million.
The ESOPs will be formed in a corporate restructuring in which Columbia is spinning off two health care groups, now known as the Pacific and America groups.
The ESOPs play a key role in the spinoffs, in that they will allow the companies to more closely tie compensation incentives to company performance, according to a federal filing by Columbia. All employees of the new companies will participate in the ESOPs, the filing states.
Companies adding ESOPs, especially large publicly trade companies, frecquently cite tying company performance closer to deferred compensation as a primary reason, said Michael Keeling, president of The ESOP Association, Washington. Smaller companies typically cite other primary reasons for creating ESOPs, he said.
The spinoff of Columbia's Pacific Group, to be called Triad Hospitals Inc., will create an ESOP worth $50 million, while the spinoff of Columbia's America Group, to be called LifePoint Hospitals Inc., will create an ESOP valued at $12 million.
Kimberly Sharp, Columbia's assistant vice president of retirement and savings plans, said executives aren't ready to discuss the deal.
The ESOP values are based on estimates for the proposed value of the initial public offerings, calculated by Mark Donovan, vice chairman-equity policy group at Boston Partners Asset Management LP.
Based on rough estimates of market value using estimated company earnings before interest, taxes, depreciation and amortization, and company debt, Mr. Donovan figures Triad's stock will be valued around $550 million, while LifePoint's will be worth about $150 million.
The Securities and Exchange Commission filing on the proposed spinoffs states the Triad ESOP will own 9% of its outstanding common stock, giving the ESOP an estimated market value of $49.5 million. The LifePoint ESOP will own 8.3% of its outstanding common stock, giving the company's ESOP an estimated value of $12.5 million, according to the SEC filing.
Both new companies also plan to create defined contribution plans, using assets transferred from Columbia, the filing states.
Columbia's total defined contribution plan had $1.4 billion in assets as of Dec. 31, 1997, the most recent date available, according to the Judy Diamond Associates Inc. Standard Directory of 401(k) Plans.
Assets also will be transferred from current Columbia money purchase pension, stock bonus and salary deferral plans attributable to current and former employees of LifePoint and Triad to the new companies, the filing states.