UHS to Buy Psychiatric Solutions in $3.1 Billion Deal

Acute-care and behavioral hospital operator Universal Health Services, based in King of Prussia, Pa., has reached a definitive agreement to purchase Psychiatric Solutions, based in Franklin, Tenn., for $2 billion in cash and the assumption of $1.1 billion in PSI debt, according to a UHS news release.

UHS owns or operates 25 acute-care hospitals and 102 behavioral health facilities and schools in the U.S. and Puerto Rico. PSI is the largest standalone operator of psychiatric inpatient facilities, with 94 facilities in 32 states, Puerto Rico and the U.S. Virgin Islands, according to the release.

UHS beat out Bain Capital for the deal, according to a report in The New York Times. Bain had been working with PSI CEO Joey Jacobs, but UHS presented a better offer late last week, according to the Times report.

The deal is another sign that the market for mergers and acquisitions, especially in healthcare, is showing signs of recovery, according to the Times.

"The combination with PSI will further strengthen our behavioral health division, which has already grown substantially through capacity expansion and strategic acquisitions," Alan B. Miller, chairman and CEO of UHS, said in the company's release. "Importantly, the combined company will have ample opportunities for further growth in both the acute care and behavioral health care sectors."

The psychiatric side of UHS' business accounted for about 25 percent of its $5.2 billion in revenue last year, according to the Times. With the merger, revenue from behavioral health will jump to 45 percent of the combined company's revenue, according to the UHS release. PSI's total revenue was $1.8 billion in 2009.

The merger, if approved, is expected to close in the fourth quarter. It is expected to result in $35 million-$45 million in annual cost synergies within three years, according to the UHS release.

Read Universal Health Service's news release on its acquisition of Psychiatric Solutions.