Vanguard Health Systems, Inc. (VHS), Tenet Healthcare Corp (THC): An Interesting Deal in the Healthcare Sector

Tenet seems to have a good deal. At $21 per share, Vanguard is valued at only 6.7 times its trailing EBITDA. The acquisition valuation is much lower than the current valuation of Tenet. At $43.80 per share, Tenet is worth $4.5 billion on the market. The market values Tenet at a higher EBITDA multiple of 8.3.

The deal could make MedAssets, Inc. (NASDAQ:MDAS) better off?

According to Sterne, Agee & Leach featured in Barron’s, this recent acquisition could benefit MedAssets, Inc. (NASDAQ:MDAS), the provider of technology-enabled solutions to hospitals, health systems and other non-acute healthcare locations. Sterne, Agee & Leach believed that MedAssets, Inc. (NASDAQ:MDAS)’s biggest client is Tenet; thus, the acquisition of Vanguard could create an additional $3 billion new opportunity for MedAssets. Indeed, over time MedAssets could gradually target Vanguard’s business as an growing revenue source, based on the existing relationship with Tenet. For the full year 2013, MedAssets management expected to generate $670 to $684 million in revenue and $1.22 to $1.32 non-GAAP EPS. The non-GAAP adjusted EBITDA might come in at $215 to $225 million. MedAssets is trading at around $17.60 per share, with the total market cap of $1.1 billion. The market values MedAssets at 9.2 times its trailing EBITDA.

My Foolish take

Tenet seems getthe good deal at its current offering price, with the lower valuation than its current market valuation. With the potential annual savings from synergies and the larger operating scale, Tenet seems to be a good buy for long-term investors.

The article An Interesting Deal in the Healthcare Sector originally appeared on Fool.com and is written by Anh Hoang.

Anh HOANG has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Anh is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.

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