02 Jan Regarding the sale of Mission Health to HCA, how was the price of $1.5B arrived at? Is it the value of all the properties, plus some additional value of the “business operations?” Can you offer an explanation that’s not crazy technical?
The purchase price is ultimately determined by what one or more sophisticated buyers is willing to pay.
Analytically, there are numerous approaches to determining value, the most common being what is called a discounted cash flow (DCF) analysis. DCF is a valuation method that analyses future cash flow projections and then discounts them back to the present using an expected annual rate of return. Another method commonly used by third-party firms is to compare one transaction with others of similar size, scope, market characteristics and other factors over a reasonable period of time to determine a fair market value range.
As we have shared, Mission Health was fortunate to have been advised by extremely well-qualified financial advisors with extensive experience in negotiating transactions of this type and knowledge of the prices paid in similar transactions. Mission Health received a fairness opinion from a nationally recognized investment bank, Cain Brothers (https://www.cainbrothers.com/), a division of KeyBanc Capital Markets. Their fairness opinion is posted on our dedicated website MissionHealthForward.org (along with all other transaction-related documents). Mission’s Board was advised by and received this fairness opinion to confirm that HCA was paying a fair price before they approved the final definitive agreements.