Leading up to the close of its acquisition of Detroit Medical Center, Vanguard Health Systems said it's issuing up to $225 million in notes to help finance the deal.
The private placement of 8 percent senior notes due 2018, along with cash on hand, will provide the $371.4 million needed to complete the transaction, according to Vanguard’s filing with the Securities and Exchange Commission [2] this morning. In total, the eight-hospital purchase is valued at $417 million, including the assumption of DMC's debt, but Vanguard will absorb $56.3 million in net cash from the nonprofit health system and shell out $11.1 million in transaction costs.
With the new notes and the acquisition, Vanguard's total outstanding indebtedness will climb from about $1.7 billion to nearly $2 billion. In January, the company launched a nearly $1 billion balance sheet overhaul [3].
If all goes well, Vanguard expects to close on the Detroit purchase [4] between Oct. 1 and Nov. 1, assimilating the health system’s 1,734 beds and nearly $2.1 billion in annual revenue. Vanguard already owns 15 hospitals with 4,135 licensed beds and recorded 2009 revenue of about $3.2 billion. The Nashville hospital operator also is working to close [5] a $40 million, two-hospital acquisition in Chicago [6] to add another 459 beds and $282 million in annual revenue.
Vanguard and DMC inked a definitive purchase agreement [7] on June 10, roughly three months after they announced the deal. The purchase is awaiting approval from the Michigan Attorney General's office.