THE legendary takeover of RJR Nabisco finally lost its title as the world’s biggest leveraged buyout yesterday as HCA, America’s largest hospital chain, succumbed to a $33 billion (£17.7 billion) takeover from a consortium including Kohlberg Kravis Roberts (KKR).

KKR, the buyout firm also behind the $31.3 billion RJR Nabisco takeover in 1988, joined Bain Capital and Merrill Lynch to acquire HCA, based in Nashville, Tennessee, for $51 a share and the assumption of its $11.7 billion debts.

Thomas F. Frist Jr, the 67-year-old former chairman and co-founder of the 176-strong hospital chain, is also part of the bidding group. Debt financing is being arranged by JPMorgan Chase, Merrill Lynch, Citigroup and Bank of America.

The deal is the latest milestone in the private equity industry, which is growing at a furious pace as pension funds, insurers and wealthy individuals allocate ever-growing piles of cash to buyout funds.

Barely a year ago, the $10.8 billion buyout of the American financial data firm SunGard Data by a consortium led by Silverlake Partners appeared to signal a move into a new league of deals. It was the first to breach the $10 billion mark since the RJR Nabisco transaction.

However, the SunGard deal has been eclipsed six times since and is dwarfed by yesterday’s HCA transaction, which is three times bigger.

Oliver Tant, KPMG head of global advisory services, said: “This deal confirms that the private equity industry is moving into a new league. The largest buyout firms now have so much cash at their disposal that they have the power to take out whole markets.

“We are starting to see them owning an increasing proportion of the biggest companies and this will continue.”

Private equity firms traditionally have been averse to hostile buyouts, but Mr Tant expects this to change.

HCA’s board yesterday recommended the consortium’s offer, but a bidding war could emerge after HCA added that it may solicit higher offers during the next 50 days under the buyout agreement.

Analysts said that buyout firms such as Thomas H. Lee, Blackstone Group, Texas Pacific and Madison Dearborn Partners would be among the groups likely to be contemplating rival bids for HCA.

HCA — Hospital Corporation of America — was set up in the mid-1960s by Thomas Frist, an eminent Tennessee doctor, and his son, Thomas Frist Jr. The company grew rapidly, was floated in 1969, before being taken private in 1988 through a $5.1 billion leveraged buyout.

HCA, which also operates 92 surgery centres and 550 home care agencies in addition to the hospitals, floated again in 1992 and has remained a public company since. The surgeries are based in 23 countries, including the UK.

Sheryl Skolnick, an analyst at CRT Capital Group, said: “It makes sense for a company like HCA to operate in private. They don’t use their equity for acquisitions or compensation. They are more likely to need to shed assets.”

Stephen Pagliuca, a managing director at Bain Capital, added: “This is a truly landmark deal.”

In a separate deal, KKR is involved in talks to buy a 54 per cent stake in PagesJaunes, the directories business, from France Télécom for about €3.3 billion (£2.2 billion).

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