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Hospital cos. in $3B deal
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October 17, 1996: 8:48 a.m. ET
Tenet to acquire Ornda in $3.3 billion stock and debt deal
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NEW YORK (CNNfn) -- Tenet Healthcare Corp. on Thursday said it will acquire rival hospital company Ornda HealthCorp. for $3.3 billion stock and debt in a deal that comes amid rapid industry consolidation.
The combined companies will create a chain of 126 hospitals stretching across 22 states and annual revenues topping $8.5 billion. It will also ease some of the pressure on Tenet -- the second-largest hospital company in the United States -- in its battle with other hospital companies.
"Less than two years ago, we created a new force in health care with the formation of Tenet," Jeffrey C. Barbakow, Tenet chairman and chief executive officer, said in a statement. "At that time, we committed ourselves to the delivery of quality, community-based health care, unquestionable business integrity and the enhancement of shareholder value. This combination with Ornda will further these goals."
Under terms of the deal approved Wednesday by the boards of directors at both companies, Tenet will pay $1.8 billion in stock to Ornda shareholders and assume another $1.5 billion in debt. Ornda shareholders will receive 1.35 shares of Tenet stock for each of their shares.
In trading Wednesday on the New York Stock Exchange, Tenet shares gained 25 cents to $22.125, while Ornda shares climbed 87.5 cents to $27.25.
The agreement follows by just two months Tenet's purchase of American Medical Holdings Inc. for $2 billion and comes as the company faces increased competition in the consolidating hospital industry.
Indeed, company executives expect the merger to strengthen Santa Barbara, Calif.-based Tenet's position in its battle with Columbia/HCA Healthcare Corp., the nation's largest hospital company. The Tenet-Ornda combination will add particular muscle to Tenet's operations in Florida, Texas and Southern California. It also will help the bottom line, slicing away $70 million in costs.
Neither company made any comment about possible job cuts.
Ornda, based in Nashville, runs 50 hospitals in 15 states. Tenet operates 76 hospitals in 13 states.
Ornda executives are expected to assume roles in the merged company. Tenet said Barbakow will retain his position as president and his Ornda counterpart, Charles Martin, will become vice chairman of Tenet.
"Five years ago, OrNda was a collection of 11 hospitals with less than $500 million in revenue," Martin said. "Today, we have 50 hospitals with pro forma revenues of approximately $2.7 billion … This merger creates a large, strong competitor with tremendous momentum and no constraints on its ability to grow." 
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