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Tenet Healthcare buying Vanguard Health for $1.8B

DALLAS – Tenet Healthcare Corp. plans to buy fellow hospital operator Vanguard Health Systems Inc. for about $1.8 billion, in a deal that will expand its reach into new markets as millions of patients start to gain insurance coverage through the health care overhaul.

Tenet said Monday that it will pay $21 per share, a 70 percent premium to Vanguard Health's Friday closing price of $12.37. The companies said the transaction also includes $2.5 billion in debt, and they value the entire deal at $4.3 billion.

Shares of Vanguard Health soared 67 percent, or $8.33, to $20.70 Monday morning after the companies announced the deal. The company's stock price had advanced only about 1 percent as of last Friday since closing 2012 at $12.25.

Tenet investors also liked the deal, pushing the Dallas-based company's stock up 6.7 percent, or $2.82, to $44.67. Meanwhile, the Standard & Poor's 500 index fell 1.5 percent.

The federal health care overhaul is expected to help hospitals by reducing the number of uninsured patients they treat. Starting next year, the overhaul will provide income-based tax credits to help people buy coverage, and the state-and-federally funded Medicaid program will expand its coverage in several states.

Tenet said Nashville, Tenn.-based Vanguard will help it expand into several new markets and increase the benefit it expects to realize from the overhaul. Vanguard runs 28 acute care and specialty hospitals in Texas, Massachusetts and major cities like Chicago, Phoenix and Detroit. Its specialty locations include heart, children's and rehabilitation hospitals.

The deal also will bring new business to Tenet's Conifer Health Solutions segment, which helps hospitals manage revenue and run their business operations.

The boards of both companies have unanimously approved the deal, which is expected to close by the end of this year. After that, Tenet will own 79 hospitals and 157 outpatient facilities. It currently has 49 hospitals and 126 outpatient facilities.

Tenet expects annual savings and gains of $100 million to $200 million largely from operating more efficiently after the companies combine.

Vanguard Health said that its founder, Chairman and CEO Charlie Martin, will join Tenet's board. Vanguard's vice chairman, Keith Pitts, will continue in that position at Tenet.

Tenet has secured fully committed financing for the transaction from Bank of America Merrill Lynch.

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