Universal Health Services (UHS) recently entered into a definitive agreement to acquire Psychiatric Solutions (PSYS) for $33.75 per share, or approximately $2 billion. Under the terms of the agreement, Universal Health will also acquire $1.1 billion of net debt, in the books of Psychiatric Solutions, taking the total transaction consideration to about $3.1 billion. The transaction was unanimously approved by the board of directors of both companies.
The behavioral healthcare services industry in which Psychiatric Solutions operates is highly regulated. Following this strategic acquisition by Universal Health, the combined company should enjoy an industry leading position in the behavioral healthcare services sector.
Psychiatric Solutions is the largest stand-alone operator with about 11,000 beds at 94 facilities in 32 states, Puerto Rico and the US Virgin Islands. Meanwhile, Universal Health is one of the nation’s largest healthcare management companies. It owns, or operates, 25 acute care hospitals, and 102 behavioral healthcare services facilities or schools, across 32 states, Washington D.C. and Puerto Rico.
The two companies had combined revenue and EBITDA of $7 billion and $1.1 billion, respectively, in fiscal 2009. On a combined basis, they would have treated 6.2 million patient days at 221 healthcare facilities across 37 states and territories. The combination is expected to generate about $35 million to $45 million in annual cost synergies, mostly front loaded in years one and two. The deal should be significantly accretive to Universal Health’s earnings per share.
The acquisition has committed debt financing to be provided by JP Morgan Chase Bank and Deutsche Bank (DB). Universal Health expects to complete the transaction in the fourth quarter of 2010.
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