Tenet to acquire Vanguard Health

Tenet Healthcare Corp. agreed to buy hospital operator Vanguard Health Systems Inc. for about uS $1.8billion in cash to grow in new markets as the u.S. healthcare overhaul promises to expand insurance coverage to more Americans starting next year.

Tenet, the third-biggest publicly traded u.S. hospital chain, will pay $21 a share, the companies said today in a statement.

That’s 70 per cent above the $12.37 closing price on June 21 for Nashville, Tennessee-based Vanguard Health. Tenet also will assume $2.5billion of debt, the companies said.

The acquisition will allow Tenet to accelerate costreduction efforts, a hallmark of health-care reform, chief executive officer Trevor Fetter said in an interview. Investors should expect more acquisitions in the future, he said.

“It’s a great strategic opportunity and I’m excited about it,” Mr. Fetter said.

“It comes at a critical point in time on the eve of the Affordable Care Act. I love the opportunity to double revenue in Texas.”

The purchase gives dallasbased Tenet 28 hospitals in the Chicago, Phoenix, detroit, Boston and San Antonio, Texas, regions.

when the sale closes, Tenet will operate 79 hospitals and 157 outpatient centres, and gain $100-million to $200million a year in savings, the company said.

“This was a surprise to most investors,” said Brian Tanquilut, an analyst at Jef- feries & Co. in Nashville, Tennessee.

“I don’ t think the Vanguard asset was speculated on as something that was for sale. People were so focused on Health Management Associates,” the Naples, Flo-based hospital operator that has been the subject of takeover speculation.

“The synergies that Tenet is forecasting — $100 to $200 million — is a good number,” Mr. Tanquilut said in a telephone interview.

“At the end of the day, this is a positive for Tenet. It’s an accretive deal off the bat. It increases their scale, which is important in the new world of health care.”

The acquisition is expected to add to earnings in the first year, the companies said. Tenet gained 4.5% to $43.73 at the close in New york. Vanguard rose 67% to $20.70, reflecting Tenet’s offer.

President Barack Obama’s Affordable Care Act may extend insurance over the next decade to about 27 million people who are currently uninsured.

The Congressional Budge t Office estimates that 8 million more people

We will have new opportunities to actively manage

our portfolio

will enrol in Medicaid programs next year because of the expansion, which raises the income eligibility limits.

The acquisition will benefit Tenet because they and Vanguard serve distinctly different markets, Mr. Fetter said Monday in a conference call.

The agreement has been in the works for months, he said.

“we will have new opportunities to actively manage our portfolio across a spectrum of assets” Mr. Fetter said.

“we will now be No. 1 or No. 2 in 19 key markets.”

The Vanguard acquisition would be the company’s biggest since it bought American Medical Holdings for $3.35- billion in 1994.

In 2011, Tenet rejected a takeover bid from Community Health Systems Inc.