June 24 - Tenet Healthcare is buying Vanguard Health for $4.3 bln including debt, the latest in a wave of consolidation sweeping hospital stocks higher. Fred Katayama reports.
Tenet Healthcare is buying its smaller rival, Vanguard Health Systems, for $4.3 billion dollars in cash and debt. It's the latest sign of consolidation in the U.S. hospital industry. Tenet is paying a hefty 70 percent premium, offering $21 a share. The companies expect the deal to close before year end and boost income in its first year with cost savings of up to $200 million. UBS analyst A.J. Rice said in a note: "While Tenet Healthcare is offering a substantial premium for Vanguard Health System shares, it is obtaining a reasonable valuation for the company in comparison to recent deals." And there have been a lot of deals. President Obama's healthcare reform and the drive to cut costs have sparked a consolidation wave in the hospital industry. Investors are counting on stronger earnings as more Americans gain insurance coverage and hospitals treat fewer uninsured people. Hospital stocks are up roughly 30 percent this year. It will now be part of a combined company that'll run 79 hospitals. One big winner out of this deal: The Blackstone Group, which bought a majority stake in Vanguard for $1.75 billion in 2004. As of March, it owns 38 percent.