When a company makes a big acquisition, its share price typically sags. That wasn't the case on Thursday for Tenet Healthcare (THC 2.90%), an operator of medical facilities. The company's stock closed a robust 22% higher following its announcement of a big-ticket investment.
Tenet is acquiring up to 45 ambulatory surgery centers (ASCs) spread across nine U.S. states. It's buying majority stakes in all of them from SurgCenter Development -- and in certain instances, the latter's physician partners -- for around $1.1 billion in cash. Tenet will also assume roughly $18 million in debt.
Those majority stakes consist of up to 60% ownership; physician partners not involved in the current deal hold the rest.
Ambulatory surgery is the healthcare industry's term for surgical procedures that do not require an overnight stay in a medical facility. Tenet said its United Surgical Partners International (USPI) subsidiary will operate the ASCs.
Tenet CEO Ron Rittenmeyer said that the acquisition "will enhance our overall business mix and further diversify our earnings profile by accelerating our shift toward lower cost of care, consumer-friendly, faster-growing assets."
Tenet said that the ASC portfolio should generate double-digit returns within three years, boosting the healthcare company's per-share earnings by around 28% in 2021. That's a healthy number in such a narrow time frame -- and from a very complementary set of assets, to boot. No wonder investors are excited about the deal.