Tenet to Acquire Vanguard Health in $4.3 Billion Deal

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The big keep getting bigger. In a joint announcement, the Dallas-based hospital chain Tenet Healthcare Corp., and the Nashville, Tenn.-based hospital chain Vanguard Health Systems noted that the acquisition would create a health care system encompassing 79 hospitals and 157 outpatient facilities spread over 16 states.

Bank of America Merrill Lynch has committed financing that allows Tenet to purchase Vanguard for $21 per share in an all cash transaction. The entire acquisition is valued at $4.3 billion, including Tenet assuming $2.5 billion in debt currently held by Vanguard. Both companies’ boards approved the transaction unanimously and they expect the deal to be completed by the end of the year.

Why the speed and excitement? Along with positioning Tenet to be a successful player in the post Affordable Care Act health care delivery model, the companies expect the deal to generate annual synergies of $100 million to $200 million. Plus, the deal allows Tenet to leverage its Conifer Health Solutions business services division across a much broader portfolio. Conifer currently serves more than 600 hospital and other clients nationwide. After the acquisition is completed, Vanguard’s hospitals will become revenue cycle clients for Conifer, and Conifer will process an additional $5 billion in net client revenue. This should result in $250 million in incremental annual revenue to Conifer.

“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 press release. “This acquisition will also include a substantial contribution from the application of Conifer’s capabilities to Vanguard’s operations. We expect additional financial contributions to come from supply costs savings and labor management efficiencies.”

As part of the deal, Charlie Martin, Vanguard’s founder, chairman and chief executive officer, will join Tenet’s Board of Directors. Keith Pitts, Vanguard’s vice chairman, will become vice chairman at Tenet.

Investors seemed to like the news. Tenet’s stock was up 5.1 percent as the time this article was posted.