Universal Health Said to Agree to Buy Psychiatric Solutions for $2 Billion

Universal Health Services Inc. agreed to buy Psychiatric Solutions Inc. for about $2 billion, ending a weekend bidding war with Bain Capital LLC, two people with knowledge of the matter said.

Universal Health agreed to pay $33.75 a share, said the people, who spoke on condition of anonymity because the talks are private. Universal Health, a hospital management company, boosted its offer by 25 cents after private-equity firm Bain mounted an eleventh-hour challenge during Psychiatric Solutions’ board meeting yesterday, the people said.

Adding Psychiatric Solutions would more than double revenue from Universal Health’s mental health-care facilities. Universal Health’s behavioral health-care operations generated $1.3 billion in 2009, and Franklin, Tennessee-based Psychiatric Solutions had $1.8 billion of revenue for the same period.

“The deal seems compelling to us,” Darren Lehrich, an analyst at Deutsche Bank AG in New York, wrote in a note. “We remain buyers of UHS shares.”

King of Prussia, Pennsylvania-based Universal Health, headed by Chief Executive Officer Alan Miller, gets about 25 percent of revenue from behavioral health, according to the company’s 2009 annual report. It also operates 25 acute-care hospitals throughout the U.S.

Spokespeople for Psychiatric Solutions, Universal Health and Bain declined to comment or couldn’t be reached.

Exploring for Months

Psychiatric Solutions, which owns or operates mental-health facilities in the U.S., Puerto Rico and U.S. Virgin Islands, began exploring a sale months ago in the form of a management- led buyout involving Chief Executive Joey Jacobs and Bain, said the people with knowledge of the talks.

The board entertained offers from rival medical-services companies as well, these people said. The board’s committee is getting advice from Goldman Sachs Group Inc. and Shearman & Sterling LLP.

Psychiatric Solutions rose 63 cents, or 2 percent, to $32.63 in Nasdaq Stock Market trading on May 14 and has gained 54 percent this year. Universal Health advanced $1.34, or 3.6 percent, to $39.04 in New York Stock Exchange composite trading. The stock is 28 percent higher this year.

To contact the reporter on this story: Zachary R. Mider in New York at zmider1@bloomberg.net.

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