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Report: Apollo Global Management in talks to buy Community Health Systems

Apollo is seeking more hospitals to add scale to its portfolio company, RegionalCare Hospital Partners, sources told Reuters.

Jeff Lagasse, Associate Editor

CHS headquarters at 4000 Meridian Blvd. in Franklin, Tennessee.CHS headquarters at 4000 Meridian Blvd. in Franklin, Tennessee.

Apollo Global Management is among the private equity firms with its eye on assets of Community Health Systems, according to a Reuters report attributing sources familiar with the talks. Rumors have circulated that CHS, loaded with heavy debt, is planning to sell its business, and the system admitted in a statement on Monday that it is "exploring a variety of options with financial sponsors."

CHS has a market capitalization of $1.3 billion and total debt of more than $15 billion, according to Reuters.

CHS has been exploring ways to raise money. In August, CHS announced it would unload two more hospitals than originally planned, bringing the total number to 12. The sale was originally expected to bring in $530 million, but it will now total $850 million. That's about $1.45 billion in annual revenue, up from the $1 billion that was projected before the two extra hospitals were added.

[Also: Community Health Systems explores financial options as rumors of sale swirl]

The transactions are expected to be completed sometime this year, CEO Wayne Smith said during an earnings call. He said each is underperforming, with earnings before interest, taxes, depreciation and amortization in the single digits.

Apollo is seeking out more hospitals to add scale to its portfolio company, RegionalCare Hospital Partners, those familiar with the talks told Reuters. With the acquisition of Capella Healthcare, Apollo doubled RegionalCare Hospital Partners' size in May, after acquiring it from Warburg Pincus.

The anonymous sources also told Reuters that a handful of real estate investment trusts have also shown an interest in CHS assets, adding that no transaction is a certainty.

[Also: CHS will unload 2 more hospitals as revenue continues to drop]

CHS assumed about $7 billion in debt in 2014 with its acquisition of rival hospital operator Health Management Associates, said Reuters. And in August, the system posted a second-quarter net loss of $1.43 billion after writing down the value of its hospital assets, at the time attributing the loss to their having "overestimated the long-term fair value of its hospitals,"

This year, in its first debt repayment since the HMA deal, Community Health Systems paid down about $1.5 billion of debt with proceeds from the spin-off of Quorum Health Corp, as well as the sale of a minority interest in hospitals in Las Vegas, Reuters reported.

Twitter: @JELagasse