In Horizon Health Corp., Psychiatric Solutions is acquiring a company that took a bit of a tumble after aggressively expanding into psychiatric hospitals during the past three years. Franklin, Tenn.-based Psychiatric Solutions contends that it wont be tripped up by its own rapid growth.
Psychiatric Solutions agreed to pay
$321 million, or $20 per share, for Lewisville, Texas-based Horizon, and also take on $105 million in debt, for a total deal value of $426 million. Horizon, which posted revenue of $275 million for the fiscal year ended Aug. 31, 2006, owns or operates 15 psychiatric hospitals or residential treatment centers, all acquired since April 2004. The company also has 115 contracts to manage psychiatric or physical rehabilitation programs within acute-care hospitals and manages employee-assistance programs that cover 4.5 million lives. Psychiatric Solutions expects to cut $10 million in duplicative costs once the acquisition is complete.
The deal came just a few weeks after Psychiatric Solutions completed its acquisition of Alternative Behavioral Services, a unit of Norfolk, Va.-based FHC Health Systems, for $210 million. ABS brought nine inpatient psychiatric facilities to Psychiatric Solutions, bringing the companys portfolio up to 74 facilities in 29 states. The company owned or operated 24 facilities in 14 states as of Dec. 31, 2003, and grew to 34 facilities in 19 states by Dec. 31, 2004, and 58 facilities in 27 states by Dec. 31, 2005, securities filings show. Revenue for the nine months ended Sept. 30, 2006, was $745.5 million. If the Horizon deal is completed, Psychiatric Solutions will own or operate 89 facilities in 31 states and will have 16% of the national inpatient psychiatric market.
Joey Jacobs, the companys chairman, president and chief executive officer, said Psychiatric Solutions is well-prepared for such rapid growth. The ABS facilities should be integrated into Psychiatric Solutions by the time the Horizon deal closes, which is expected during the second quarter of 2007, he added. Those nine facilities were already using the same information technology platform that Psychiatric Solutions uses, Jacobs said.
The Horizon deal has a couple of hurdles to clear before it can close. It requires Hart-Scott-Rodino antitrust approval from the Federal Trade Commission and Horizon shareholders also must approve the deal.