Tenet Healthcare Corporation has signed a definitive agreement to acquire Vanguard Health Systems for a cash consideration of $1.73bn, or $21 per share.
The deal is valued at $4.3bn and includes an assumption of $2.5bn in Vanguard debt. Tenet plans to fund the acquisition through secured fully committed financing from Bank of America Merrill Lynch.
Private equity firm Blackstone Group holds 38% share, the largest, in Vanguard and will reportedly earn over $600m in the sale.
In addition to expanding Tenet’s total ownership to 79 hospitals and 157 outpatient facilities, the deal will enable the company spread its geographic footprint to 16 states, including two new markets in Texas, while widening its service offerings.
Tenet currently operates 49 hospitals and 126 outpatient centres while Vanguard owns 28 acute care and specialty hospitals and services in the states Illinois, Arizona, Michigan, Texas and Massachusetts.
Trevor Fetter, president and CEO of Tenet, said: “This unique strategic transaction will bring together organizations that share a common commitment to providing high quality care and create significant new growth prospects for Tenet.
“We also believe that a combination with Vanguard will open an important new avenue of growth among not-for-profit health systems where Vanguard has built a tremendous reputation for being a creative strategic partner.”
The acquisition, which is subject to customary closing conditions and regulatory approvals, is expected to close by the end of 2013.
Upon closing of the deal, Charlie Martin, founder, chairman and CEO of Vanguard, will join Tenet’s board. Keith Pitts, vice chairman of Vanguard, will join the senior management team of Tenet as vice chairman.
Martin said: “Together, we now have the scale and strength to achieve the vision we have pursued in parallel.”