Tenet Announces Acquisition of Vanguard

June 25, 2013 12:58 by Clayton Reeves in Capital Markets, Healthcare, M&A  //  Tags:   //   Comments (0)

Tenet has announced that they will acquire Vanguard Health Systems in a deal valued at $4.3 billion including the assumption of $2.5 billion in Vanguard debt. The deal is expected to close by the end of this year. Tenet anticipates annual synergies between $100-200 million. The offer price of $21 represents a 70% premium to Friday's closing price of $12.37 a share. The combined entity would form the second largest for-profit hospital in the country. The transaction will be financed by BoA, including a recapitalization of the existing Vanguard debt at attractive rates. (Reuters)

The EV/EBITDA multiple came in at ~11.6x, using March '12-13 numbers (Yahoo! Finance), which is higher than the 8x EBITDA that many hospitals are trading at. 

Healthcare continues to be a hotbed for acquisitions, as large players like Tenet expand aggressively. According to Healthcare Daily, Greg Koonsman, a senior partner at VMG Health in Dallas, recently said that “systems offensively and defensively are getting bigger. There is a lot of vertical integration. It’s Business 101. They are getting bigger at any cost... There is a lot of capital chasing few sellers right now. However, about 2,000 (of the nation’s 5,300 hospitals) should be for sale.”

Looks like we will continue to see activity in the healthcare sector.

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