HCA Holdings (HCA) Enters Agreement to Settle Shareholder Litigation; Includes $215M Payment

November 4, 2015 8:19 AM EST

HCA Holdings (NYSE: HCA) disclosed the following on Wednesday morning:

HCA Holdings, Inc., a Delaware corporation (the “Company” or “HCA”), has reached a preliminary agreement in principle to settle a shareholder action, Schuh v. HCA Holdings, Inc. et al., that is pending against the Company and certain other defendants in the United States District Court for the Middle District of Tennessee related to the Company’s 2011 initial public offering. The Company also reached preliminary agreements to settle two shareholder derivative cases, Sutton v. Bracken, et al. and Schroeder v. Bracken, et al., that are pending against certain officers and directors of the Company in the United States District Court for the Middle District of Tennessee and Bagot v. Bracken, et al. that is pending against certain officers and directors of the Company in Tennessee state court in the Davidson County Circuit Court, each of which also related to the Company’s 2011 initial public offering. The preliminary settlements provide for the resolution of all of the pending claims in the actions discussed above, without any admission or concession of wrongdoing or liability by the Company or the other defendants, and are contingent upon, among other things, successful negotiation of remaining non-monetary terms, the parties’ execution of final settlement documents, approval by the Company’s Board of Directors, notification to the shareholder class in the Schuh case and preliminary and final approval of any settlements by state and federal courts in Tennessee.

The monetary terms of the settlement in the Schuh case include a payment by HCA of $215 million in return for a full release of all claims against all defendants, including the Company, its officers and directors, the underwriters and Hercules Holding II, LLC, a majority shareholder of the Company at the time of the initial public offering. The terms of the settlements of the derivative cases include receipt by the Company of $19 million from insurance policies covering the claims asserted in the derivative cases, certain corporate governance reforms and agreement by the Company to pay attorney fees in the aggregate amount of $5.5 million in return for full releases of all claims against all defendants. HCA estimates that it will record legal claim costs, net of expected insurance recoveries, of approximately $120 million for the settlements of the shareholder action and shareholder derivative cases and related costs.

For certain background information regarding the actions discussed above, please refer to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2015, as filed with the Securities and Exchange Commission on October 29, 2015.



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