Psychiatric Solutions Rises on Buyout Talk

FRANKLIN, Tenn. (TheStreet) -- Psychiatric Solutions (PSYS) shares closed more than 21% higher after the company confirmed it had been approached about being acquired.

The Wall Street Journal reported the company, which operates mental health hospitals and clinics, was in talks to be acquired by private-equity firm Bain Capital.

After the Journal story was published, Psychiatric Solutions confirmed Wednesday it was approached by third parties in connection with a "potential acquisition." The company said it formed a special committee of its board and has sought financial and legal advice. In its statement, the company didn't disclose the identity of the third party.

Psychiatric Solutions said "there can be no assurance that any transaction for a purchase" would take place, adding it would keep quiet until an agreement is reached or it decides not to pursue a transaction.

The company is seeking around a 25% premium to its current market price, sources told the Journal. However, an exact takeover price couldn't be determined. Any deal would include the assumption of Psychiatric Solutions' outstanding debt of $1.2 billion.

Other private-equity firms such as CCMP Capital Advisors and Kohlberg Kravis Roberts looked at Psychiatric Solutions' business last fall but eventually passed, the Journal reports. Blackstone(BX) also was considering merging the company into its Tennessee-based hospital chain Vanguard Health Systems, sources familiar with the firm's thinking told the newspaper.

Bain, however, has emerged as the most likely buyer, the Journal says.

Psychiatric Solutions shares rose $5.09, or 21.3%, to $29 during the regular session Wednesday and rose another 9 cents in after-hours trading.

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