Blackstone Ends Three-Year Public LBO Drought on Team Health

(Bloomberg) -- After a three-year drought, the world's biggest private equity firm has agreed to take a public company private in a traditional leveraged buyout.

Blackstone Group LP's $6.1 billion agreement to buy Team Health Holdings Inc., announced Monday, is the first public-to-private buyout by the firm's private equity group since October 2013. That month, New York-based Blackstone agreed to take Chinese technology consulting and outsourcing firm Pactera Technology International Ltd. private for $645 million.

Blackstone has struck several deals for private companies in the interim period, including energy and power assets after commodity prices slid in 2014. Its private equity team, led by Joe Baratta, acquired closely held industrial-products maker Gates Global Inc. from Onex Corp. and Canada Pension Plan Investment Board that year in a $5.4 billion transaction.

The agreement to buy Team Health, which provides health-care staffing to hospitals, is a signal that Blackstone is finding some opportunities amid lofty valuations that have kept much of the industry at bay. Global private equity-led buyouts stood at about $230 billion this year through Sept. 30, down 20 percent from the same period last year, according to research firm Preqin.

Second Ownership

In a rare move for a private equity firm, this will be Blackstone's second time owning the Knoxville, Tennessee-based company. Blackstone bought Team Health for about $1 billion in 2005 and took it public in 2009. The firm reaped about a 250 percent profit on its investment of $330 million, according to regulatory filings.

Team Health rejected an unsolicited takeover offer last year from rival AmSurg Corp. that valued the company at $7.6 billion including debt. In February, the sometimes-activist hedge fund Jana Partners disclosed an 8 percent stake in the company, nominating three executives as dissident directors and criticizing Team Health over missteps in capital allocation, strategy and governance.

Several large private equity firms have been sidelined this year, as the same elevated valuations that created ideal conditions to sell holdings have made it difficult to execute new deals at attractive entry prices.

Baratta, Blackstone's global head of private equity, said last month that with historically high valuations, “it's the most treacherous moment” for professional dealmakers to invest. His group is holding about $45 billion in dry powder, or committed money yet to be deployed, Blackstone said in its third-quarter earnings statement last week.

Apollo Global Management LLC has proved to be the industry exception. Co-founder Josh Harris last week said the firm is on track to deploy more money in 2016 than in any other year in its 26-year history. Because of the heightened activity, Apollo is starting to raise money for a new buyout fund that could reach almost $20 billion by the end of next year, Harris said.

Blackstone, led by Chief Executive Officer Steve Schwarzman, manages $361 billion in private equity holdings, real estate, credit assets and hedge funds. Equity for the Team Health deal will come from the firm's latest private equity fund, which finished gathering $18 billion last year, and co-investors.

--With assistance from David Carey To contact the reporter on this story: Melissa Mittelman in New York at mmittelman@bloomberg.net. To contact the editors responsible for this story: Elizabeth Fournier at efournier5@bloomberg.net, Devin Banerjee, Elizabeth Wollman