by Demitri Diakantonis | Published June 5, 2012 at 1:50 PM
Hospital operator Universal Health Services Inc. said Monday, June 4 that it agreed to acquire venture capital-backed counterpart Ascend Health Corp. for $517 million in cash, including debt.
King of Prussia, Pa.-based Universal Health will pay $500 million in cash and assume $17 million of the target's debt.
Ascend, founded in 2005, owns or leases nine psychiatric hospitals throughout Arizona, Oregon, Texas, Utah and Washington. The New York-based company treats patients with mental health disorders and also has a substance abuse treatment program.
The acquisition allows Universal Health to expand into the behavioral healthcare segment.
"We believe that combining with UHS represents an outstanding opportunity for our company and will greatly benefit our patients and staff," said Ascend chief executive and founder Richard Kresch in a statement.
Some of Ascend's investors include CHL Medical Partners, Polaris Venture Capital Partners and Three Arch Partners. The three firms last injected about $20 million in Series B financing into Ascend in March 2007, following an undisclosed investment when the target was started in 2005.
The two sides expect to complete the transaction by the end of the fourth quarter, pending regulatory approval. Universal Health expects Ascend to immediately add to its earnings.
Monday's transaction marks the first major acquisition Universal Health has made since it acquired Psychiatric Solutions Inc. in November 2010 for about $3.1 billion, including debt. In November 2011, the company purchased the Knapp Medical Center in Weslaco, Texas, for undisclosed terms.
In May, Universal Health agreed to sell the Auburn Regional Medical Center to MultiCare Health System for about $98 million.
Strategic buyers and private equity firms alike have been looking to buy hospital chains lately.
In April, Boston private equity firm Advent International Corp. invested $105 million in Indian hospital operator Care Hospitals.
In February, Willis Stein & Partners-backed Merit Health Systems LLC sold Mountainside Hospital to a joint venture between LHP Hospital Group Inc. and Hackensack University Medical Center for undisclosed terms.
Also in February, Doughty Hanson & Co. acquired Spanish hospitals operator USP Hospitales SL for $471 million.
A J.P. Morgan Securities LLC team including Jeff Stute, Cory Rapkin, Chris Martell, Matt Mainelli, Nikul Patel and Bradley Watts advised Universal on its purchase of Ascend. Minh Van Ngo and Christine Varney of Cravath, Swaine & Moore LLP provided legal counsel.
Goldman, Sachs & Co. advised Ascend. A Cahill Gordon & Reindel LLP team including Jonathan Schaffzin, Michael Sherman, Elai Katz, Craig Horowitz and Glenn Waldrip Jr. provided legal representation.
Universal Health shares were trading 2% higher on Monday afternoon, to $38.06, with its market capitalization near $3.7 billion.