CERBERUS CAPITAL MANAGEMENT started recouping its investment in Steward Health Care on Monday as the Massachusetts-based hospital system announced it was raising $1.25 billion through a deal with an Alabama company.
Steward sold five of its nine hospitals to Medical Properties Trust of Birmingham, Alabama, for $600 million and agreed to lease them back under long-term leases. Steward also obtained mortgages worth $600 million from Medical Properties Trust for its remaining four hospitals. The Alabama company also agreed to make a $50 million equity investment in Steward.
The companies didn’t spell out how the deal will change the ownership of Steward, but a Steward press release said the company’s management would take “a greater equity stake in the company” and the infusion of cash from Medical Properties Trust would be used to pay off the “original investment” New York-based Cerberus made in Steward nearly six years ago. News reports at the time said the original investment was $830 million.
Medical Properties Trust said its ownership stake in Steward after the deal is completed would be 4.9 percent, which would put the health care company’s valuation at $1.02 billion.
Ralph de la Torre, the chairman and CEO of Steward, said the investment by Medical Properties Trust and the continued commitment of Cerberus will allow Steward to expand outside of Massachusetts. “We believe this investment is a strong validation of our business model and an endorsement of our ability to scale nationally,” he said in a statement.
In the Steward press release, the company said Medical Properties Trust agreed to participate in the next $1 billion of Steward’s hospital acquisitions. That arrangement was not mentioned in the Medical Properties Trust release on the deal. Medical Properties Trust did say Cerberus had agreed to invest $150 million in the company’s stock.
Steward, a for-profit rarity in Massachusetts, employs more than 17,000 people in Massachusetts and generated $2.3 billion in revenue in 2016. The company was founded in 2010 and generated its first profit of $131 million in 2015.
Under Steward’s deal with Medical Properties Trust, the Alabama company will purchase Saint Anne’s Hospital in Fall River, Holy Family Hospital in Methuen, St. Elizabeth’s Medical Center in Brighton, Good Samaritan Medical Center in Brockton, and Morton Hospital in Taunton. Mortgages will be taken out on Holy Family Hospital in Haverhill, Carney Hospital in Dorchester, Norwood Hospital in Norwood, and Nashoba Valley Medical Center in Ayer.