Psychiatric Solutions, Franklin, Tenn., said it terminated a $250 million agreement to buy Alternative Behavioral Services, Norfolk, Va., because of an unresolved "material adverse change" at one ABS facility. ABS' parent company, FHC Health Systems, subsequently filed a lawsuit in Delaware Chancery Court seeking to force completion of the deal. ABS Chief Executive Officer Edward Irby said his company didn't believe there had been a material adverse change. Psychiatric Solutions CEO Joey Jacobs, speaking on a conference call with investors, said the lawsuit wasn't unexpected but that his company had operated in accordance with the agreement's terms. The deal was announced in May. Jacobs said the problem arose after the deal was signed and couldn't be resolved. He declined to provide specifics. Privately held ABS operates behavioral-health facilities with a total of about 1,050 beds in four states, Puerto Rico and the U.S. Virgin Islands. Psychiatric Solutions operates 64 inpatient psychiatric facilities with a total of about 6,900 beds in 27 states. -- by Jessica Zigmond
Psychiatric Solutions cancels ABS deal
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