DALLAS--(BUSINESS WIRE)--Tenet Healthcare Corporation (NYSE: THC) and Welsh, Carson, Anderson &
Stowe have signed a definitive agreement under which Tenet and United
Surgical Partners International (USPI) will combine their short-stay
surgery and imaging center assets into a new joint venture. The Tenet
and USPI joint venture will be the largest provider of ambulatory
surgery in the United States.
Under the terms of the agreement, Tenet will initially own 50.1% of the
joint venture and will consolidate its financial results. Welsh Carson
and the other existing investors in USPI will initially own the
remaining 49.9%. Tenet will have a path to full ownership of USPI over
the next five years through a put/call structure.
The joint venture will have ownership interests in 244 ambulatory
surgery centers, 16 short-stay surgical hospitals and 20 imaging centers
in 29 states. It will maintain the USPI brand, as well as USPI’s
innovative three-way partnership model with physicians and leading
not-for-profit health systems. The combined operations will have
partnerships with 50 health systems and more than 4,000 physicians at
the facility level. Bill Wilcox will continue to lead USPI as chief
executive officer, and Brett Brodnax, president and chief development
officer of USPI, will lead the company’s strategy and growth efforts.
Kyle Burtnett, senior vice president for outpatient services at Tenet,
will join USPI as president of ambulatory services and will take on the
additional role of chief integration officer for the new venture.
“Through strong partnerships with physicians and leading health systems,
USPI has built a network of relationships and facilities that are
providing high quality surgical care across the United States,” said
Trevor Fetter, Tenet’s president and chief executive officer. “Creating
this joint venture with the premier operator of short-stay hospitals and
surgery centers has strategic and financial benefits for both parties.
The partnership accelerates Tenet’s and USPI’s shared strategy to expand
our ambulatory service offerings to meet growing consumer demand for
services that are provided in a lower cost, more convenient setting and
that are aligned with the long-term transition to value-based care. In
addition, together Tenet, USPI and Conifer Health Solutions will be even
better positioned as a strategic and capital partner to not-for-profit
health systems. Financially, this transaction is expected to be neutral
to EPS this year and accretive to EPS in 2016, to sustainably increase
our growth and profitability, and improve our cash flow profile.”
Bill Wilcox, chief executive officer of USPI, said, “We share Tenet’s
vision and excitement with regard to the benefits of this transaction
and look forward to working with Tenet to grow our ambulatory services
platform. Tenet is committed to delivering high quality care and clearly
values its partners, and together we will further establish USPI as the
innovative leader in providing ambulatory solutions for healthcare
systems. The growth potential of USPI is strengthened as a result of
this partnership.”
Tenet also has entered into a definitive agreement to acquire from Welsh
Carson the operations of Aspen Healthcare Ltd., which operates nine
private hospitals and clinics in the United Kingdom. Aspen began as a
two hospital system that was acquired by USPI in April 2000 with backing
from Welsh Carson. USPI grew the system before a restructuring of the
USPI group in 2012, which resulted in it becoming an independent company
majority owned by Welsh Carson.
“Aspen Healthcare has achieved a strong track record of performance
under Welsh Carson’s ownership, and their significant and smart capital
investments in recent years have positioned the company to drive
additional robust growth in the future,” said Mr. Fetter.
Both transactions are subject to customary closing conditions, including
in the case of USPI the receipt of regulatory approvals, and both are
expected to close by the third quarter of 2015.
Strategic Benefits
Establishes the leading U.S. short-stay surgery platform.
Combining Tenet’s and USPI’s ambulatory surgery facilities creates the
leading ambulatory surgery business, with the largest portfolio,
geographic footprint and scale in the sector. The three-way partnership
model, strong reputation with not-for-profit health systems, and
complementary expertise and experience of the combined management team
will strongly position USPI for future growth. In addition, Tenet’s
imaging facilities will be included in the joint venture, and the
companies anticipate adding other ambulatory services in the future as
part of a strategy to offer a full range of ambulatory solutions for
health system partners.
Advances Tenet’s long-term strategic vision and significantly
enhances earnings profile. This transaction significantly
expands Tenet’s portfolio of higher growth, higher margin, more
capital-efficient ambulatory services and will enhance the
company’s position as a diversified healthcare services company.
Following the completion of the transaction, Tenet will have solidly
established positions in its traditional acute care business, its
ambulatory business, and its services business, making the combined
company an even stronger partner to not-for-profit health systems.
Financially, the transaction is expected to be neutral to EPS this year
and accretive to EPS in 2016, to sustainably increase EBITDA margins and
EBITDA growth, and improve Tenet’s cash flow profile. The company
expects a minimal increase in its leverage ratio in the near term and to
remain on a path to reduce leverage over time.
Aligns Tenet with key healthcare trends and growth drivers.
The transaction increases Tenet’s ability to participate in and benefit
from the growing demand for lower-cost, more consumer-friendly services
provided in freestanding ambulatory facilities. This demand is being
driven by consumer and physician choice, payers and employers, and
value-based payment models that create incentives for care to be
delivered in lower-cost settings. In its acute care markets, the
partnership with USPI will enhance Tenet’s ability to develop and expand
ambulatory services, build integrated networks, and participate in
value-based and other risk-based models with payers. It also will drive
growth by providing a platform that will enable Tenet to partner with
additional not-for-profit health systems to expand ambulatory services
in markets where the company does not own or operate acute care
hospitals.
Highly-respected management team will continue to lead the
business. The USPI management team has built the preeminent
short-stay surgery business through its pioneering three-way partnership
model. It has a strong track record of financial performance and growth.
That management team will be joined by key members of Tenet’s Outpatient
Services Division, which has driven Tenet’s successful multi-year
initiative to increase outpatient revenue through organic growth, de
novo development and acquisitions.
Entering the growing U.K. market through the acquisition of Aspen
Healthcare. Aspen is a strong, growing network of
well-capitalized private hospitals and clinics, with an established
management team led by executive chairman Mark Kopser and chief
executive officer Des Shiels. It offers Tenet an attractive opportunity
to enter the U.K. market, where the demand for private healthcare
services is steadily increasing due to demographic changes, growth in
consumer healthcare spending, and increasing opportunities to work with
and support the National Health Service.
Financial Terms
Under the terms of the agreement, Tenet will contribute 44 freestanding
ambulatory surgery centers and 20 imaging centers. Welsh Carson will
contribute USPI’s 202 ambulatory surgery centers and 16 surgical
hospitals. Tenet will pay approximately $425 million in cash to Welsh
Carson and the other existing shareholders in USPI to align the
respective valuations of the contributed assets. The venture expects to
realize approximately $50 million of corporate and facility level
synergies over the next three years.
At closing, Tenet will own 50.1% of the joint venture, with Welsh Carson
and existing shareholders of USPI owning the remaining 49.9%. Based on
the respective valuation multiples and the expected EBITDA less NCI at
the joint venture over the next year, the enterprise value of the joint
venture approximates 12.5x forward EBITDA less NCI, based on an equity
value of approximately $2.6 billion. The agreement contains a put/call
structure, under which Tenet can acquire the remaining Welsh Carson
investment in USPI over the next five years at a fixed multiple of 9.5x
forward EBITDA less NCI.
In a separate transaction, Tenet is buying Aspen Healthcare from Welsh
Carson for approximately $215 million in cash. Aspen Healthcare will not
be included in the new joint venture.
In total, Tenet expects to raise $2.2 billion of debt related to these
transactions, to be used principally to refinance $1.5 billion in
existing debt of USPI, make the $0.6 billion in cash payments to Welsh
Carson for USPI and Aspen, and for related transaction expenses.
These transactions are expected to close by the third quarter of 2015,
after which the company intends to update its 2015 guidance.
J.P. Morgan and Lazard acted as financial advisors to Tenet, and Gibson,
Dunn & Crutcher served as Tenet’s legal counsel. Barclays acted as lead
financial advisor to USPI, with Goldman Sachs also acting as financial
advisor, and Ropes & Gray LLP serving as legal counsel. For Aspen,
Barclays and Goldman Sachs served as financial advisors. Barclays has
provided committed financing to Tenet as part of the transaction.
Management’s Webcast Discussion of Transaction
Tenet and USPI management will discuss this transaction on a webcast
scheduled for 8:30 a.m. (ET) on March 23, 2015. Investors can access the
webcast through Tenet’s website at www.tenethealth.com/investors.
A set of slides, which will be referred to on the conference call, will
be made available on the same section of the Company’s website prior to
the start of the call.
About Tenet
Tenet Healthcare Corporation is a national, diversified healthcare
services company with 110,000 employees united around a common mission:
to help people live happier, healthier lives. The company operates 80
hospitals, 214 outpatient centers, six health plans and Conifer Health
Solutions, a leading provider of healthcare business process services in
the areas of revenue cycle management, value-based care and patient
communications. For more information, please visit www.tenethealth.com.
The terms "THC", "Tenet Healthcare Corporation", "the company", "we",
"us" or "our" refer to Tenet Healthcare Corporation or one or more of
its subsidiaries or affiliates as applicable.
About United Surgical Partners International
USPI, headquartered in Dallas, Texas, currently has ownership interests
in or operates 218 facilities, of which 154 are jointly owned with
not-for-profit healthcare systems. For more information, please visit www.uspi.com.
About Welsh, Carson, Anderson & Stowe
Welsh, Carson, Anderson & Stowe focuses its investment activity in two
target industries, information/business services and healthcare. Since
its founding in 1979, the Firm has organized 16 limited partnerships
with total capital of over $21 billion. The Firm is currently investing
an equity fund, Welsh, Carson, Anderson & Stowe XI, L.P., and has a
current portfolio of over 25 companies. WCAS’s strategy is to partner
with outstanding management teams and build value for the Firm’s
investors through a combination of operational improvements, internal
growth initiatives and strategic acquisitions. See www.welshcarson.com
to learn more.
This release contains “forward-looking statements” – that is, statements
that relate to future, not past, events. In this context,
forward-looking statements often address our expected future business
and financial performance and financial condition, and often contain
words such as “expect,” “assume,” “anticipate,” “intend,” “plan,”
“believe,” “seek,” “see,” or “will.” Forward-looking statements by their
nature address matters that are, to different degrees, uncertain.
Particular uncertainties that could cause our actual results to be
materially different than those expressed in our forward-looking
statements include, but are not limited to, the occurrence of any event,
change or other circumstances that could give rise to the termination of
the acquisition agreements described herein; the failure to satisfy
conditions to completion of the transactions, including receipt of
regulatory approvals; our ability to fully realize the anticipated
benefits and synergies of our acquisitions and to successfully complete
the integration of businesses we acquire; and the factors disclosed
under “Forward-Looking Statements” and “Risk Factors” in the Form 10-K
for the year ended December 31, 2014 for each of Tenet and USPI, and in
the quarterly reports on Form 10-Q, periodic reports on Form 8-K and
other filings with the Securities and Exchange Commission made by each
company. The information contained in this release is as of the date
hereof. Neither Tenet nor USPI assumes any obligation to update
forward-looking statements contained in this release as a result of new
information or future events or developments.
Tenet and USPI use their company websites to provide important
information to investors about the company including the posting of
important announcements regarding financial performance and corporate
developments.
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