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Cain Brothers Advises Caritas Christi Health Care in Sale to Cerberus Capital Management's Steward Health Care System

Cain Brothers & Company served Boston-based Caritas Christi Health Care (CCHC) as financial adviser in the recently completed successful sale to Steward Health Care System LLC (Steward), a newly formed affiliate of private equity firm Cerberus Capital Management, L.P. (Cerberus). Caritas and Cerberus announced that the transaction was completed on November 8, 2010. The system will continue to operate under the Caritas Christi banner and be led by CEO Dr. Ralph de la Torre and the current senior leadership team of CCHC.

The transaction represents the largest conversion of a not-for-profit health system to taxable status in Massachusetts' history and the largest in the U.S. in many years. The transaction brings to CCHC approximately $895 million of new capital to be utilized for the assumption of pension obligations, repayment of debt, funding for operations, and significant capital projects. The CCHC hospitals will undergo major infrastructure improvements and benefit from significant investments in clinical technology and health care information technology.

Robert J. Fraiman, CEO of Cain Brothers and the leader of Cain Brothers' transaction team, said, "We were pleased to assist Caritas CEO Ralph de la Torre, the Board of CCHC and the senior management team to complete this exceptional transaction. It is forward-looking in scope, and it will be good for the system and the communities and patients it serves. We are confident that Steward will be at the forefront of the trend towards community-based accountable care organizations (ACOs), which is driven by the health care reform legislation enacted earlier this year combined with the need for more efficient delivery of care to patients."

Carsten Beith, Managing Director of Cain Brothers and leader of the firm's tax-exempt merger and acquisition advisory service, said, "Although the Caritas-Cerberus transaction is unusually large, consolidation activity among hospitals and hospital systems is accelerating nationally. We expect to see a dramatic increase in the number of hospital M&A transactions among both not-for-profit and for-profit health care providers. The most significant factors leading to this activity include: capital markets that continue to be challenging, especially for providers that have significant capital improvement needs, as well as health care reform, with its heavy information technology requirements and the need better manage the risks of utilization and outcomes, while providing increased transparency for both patients and regulators."

Cain Brothers is a leading investment banking firm that focuses exclusively on the health care industry. The firm's clients include investor-owned and tax-exempt providers, payors, health care information technology and medical technology companies, and financial sponsors. The firm has one of the largest teams of experienced bankers and capital markets professionals on Wall Street dedicated to the health care industry. Operating out of nine offices across the country, the firm creates custom-tailored, market-based capital raising, M&A, real estate, and strategic and financial advisory solutions for its clients.