Psychiatric Solutions Confirms Buyout Interest - Update

(RTTNews) - Mental health facilities operator Psychiatric Solutions, Inc. (PSYS: News ) confirmed Wednesday that it has been approached by third parties about a possible acquisition of the company.

The Franklin, Tennessee-based company also said it has formed a special committee of the board of directors, which has retained Goldman, Sachs & Co. and Shearman & Sterling LLP as its financial and legal advisors, respectively.

Earlier in the day, the Wall Street Journal reported, citing people familiar with the matter, that Psychiatric Solutions is in talks to be acquired by private equity firm Bain Capital LLC. Psychiatric Solutions is reportedly seeking a 25% premium to its current market price. Any deal would also include the assumption of the company's outstanding debt of $1.2 billion. Following the report, the company's shares gained 21% in the regular trading session.

Established in 1984, Bain Capital currently manages about $65 billion in assets. The firm has founded, acquired, or invested in several companies including AMC Entertainment, Brookstone, Burger King, Burlington Coat Factory, Domino's Pizza, Toys R Us, Unisource and Warner Music Group.

In one of its recent deals, Bain agreed to buy Styron, the basic plastics unit of diversified chemicals firm Dow Chemical Co. (DOW), for $1.63 billion. Bain is also one of the lead investors in Nashville-based HCA Inc., the nation's largest hospital operator, which Bain and KKR acquired for $21.3 billion in 2006.

Private-equity firms have reportedly been in talks with Psychiatric Solutions since last fall. CCMP Capital Advisors and Kohlberg Kravis Roberts & Co. were earlier interested, but eventually passed. The Wall Street Journal reported that Blackstone Group was also considering merging the company into its Tennessee-based hospital chain Vanguard Health Systems Inc.

Psychiatric Solutions is an operator of owned or leased freestanding psychiatric inpatient facilities with over 11,000 beds in 32 states, Puerto Rico and the U.S. Virgin Islands. The company also manages freestanding psychiatric inpatient facilities for government agencies and psychiatric inpatient units within medical/surgical hospitals owned by others.

In late February, Psychiatric Solutions reported a 15% increase in profit for the fourth quarter from the year-ago period, helped by an increase in revenue. Net income attributable to the company's stock holders increased to $27.67 million or $0.49 per share from $24.02 million or $0.43 per share in the year-ago period. Revenue for the quarter increased 8.1% to $463.00 million from $428.4 million in the year-ago quarter.

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