In an effort to diversify its geographic reach and earnings sources, Tenet Healthcare (NYSE: THC ) has made a definitive, all-cash offer to acquire Vanguard Health Systems (NYSE: VHS ) for $21 per share, the companies announced today. Vanguard closed at $12.37 a share on Friday, so the offer is nearly 70% over that closing price.
The total value of the deal is $4.3 billion, and includes the assumption of $2.5 billion of Vanguard's debt. The companies expect annual savings of $100 million to $200 million due to anticipated synergies, including "supply costs savings and labor management efficiencies," and should be accretive to Tenet's earnings within the first year. The boards of directors of both Tenet Healthcare and Vanguard have unanimously approved the proposed deal.
Trevor Fetter, president and CEO of Tenet, commented, "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 health care reform."
Vanguard founder, chairman and CEO Charlie Martin added, "Together, we now have the scale and strength to achieve the vision we have pursued in parallel." Martin, along with Vanguard's current vice chairman Keith Pitts, will join the Tenet executive management team as member of the board of directors and vice chairman, respectively.
The deal is expected to close before year's end and is subject to customary closing conditions. Shares of both companies soared on the news.
Tenet Healthcare Corp. operates 49 hospitals, 126 free-standing outpatient centers, and Conifer Health Solutions, a business process solutions provider for health care providers that serves more than 600 hospital and other clients nationwide. The deal would expand Tenet’s total ownership to 79 hospitals and 157 outpatient facilities and spread its geographic footprint to 16 states, including two new markets in Texas.