Tenet Healthcare Corp. will purchase Vanguard Health Systems, Inc. for about $1.8 billion plus assuming its debt in order to diversify and broaden services lines and geographic coverage, as the sector continues on its tear to consolidate in the face of changes coming with the Affordable Care Act.
In the all-cash transaction, Tenet will pay $21 per share, the companies said Monday in a joint news release. The acquisition is valued at $4.3 billion and includes the assumption of $2.5 billion in Nashville-based Vanguard debt.
Tenet also anticipates annual savings of $100 million to $200 million annually and for the transaction to be accretive to earnings in the first year, the release said.
Both Boards of Directors have unanimously approved the transaction, and Tenet has secured fully committed financing from Bank of America Merrill Lynch, so the deal should close before the end of the year.
As a result of the acquisition, Dallas-based Tenet will own 79 hospitals and 157 outpatient facilities across 16 states, including two new markets in Texas. Tenet currently has 49 hospitals, 126 free-standing outpatient centers, and Conifer Health Solutions, which offers business process solutions for healthcare providers.
“This acquisition will take Tenet into new geographic markets, expand the breadth of our service offerings, diversify our earnings sources and increase the benefits we expect to realize under healthcare reform,” said Trevor Fetter, Tenet president and CEO, in the release.
He also said that Tenet would also apply Conifer’s business process transformation to Vanguard operations and gain further financial improvements from supply cost savings and labor management efficiencies.
[See also: Experts split on consolidation benefits]
Upon closing, Charlie Martin, Vanguard’s founder, chairman and CEO, will join Tenet’s Board of Directors. Vanguard’s vice chairman, Keith Pitts, will continue in that position with Tenet, the release said.
[See also: Hospital consolidation rising]