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Tenet forms JV to create largest US ambulatory surgery provider

(Adds details on the deals, background, shares)

March 23 (Reuters) - Tenet Healthcare Corp (NYSE: THC - news) said it would create the largest provider of ambulatory surgery services in the United States through a joint venture with United Surgical Partners International (USPI), with the option to buy USPI over five years.

Tenet said it will pay $425 million to private equity firm Welsh, Carson, Anderson & Stowe and other USPI shareholders and assume $1.5 billion of USPI's debt for a 50.1 percent stake in the venture.

Dallas-based Tenet also said it would buy Aspen Healthcare from Welsh Carson for about $215 million in cash to enter the UK short-stay surgery market.

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Tenet's shares rose nearly 5 percent to $52 in premarket trading on Monday.

The USPI deal will create a firm worth about $2.6 billion with 244 ambulatory surgery centers, 16 short-stay surgical hospitals and 20 imaging centers in 29 states.

Ambulatory or outpatient surgery allows patients to return home on the same day a surgical procedure is performed.

The deal comes as more Americans visit hospitals due to expanded insurance coverage under the Affordable Care Act through government-run marketplaces and an expansion of the Medicaid program for the poor.

That has led to increasing consolidation in the industry. Tenet's bigger rival Community Health Systems (NYSE: CYH - news) won approval to buy Health Management Associates Inc in January last year, a few months after Tenet itself wrapped up a $1.73 billion deal to buy Vanguard Health Systems Inc.

The joint (NasdaqCM: JYNT - news) venture with USPI will allow Tenet, the third-largest U.S. for-profit hospital operator, to better serve the not-for-profit health system operators.

Tenet said it expects the deal to be neutral to its earnings this year and add to profit in 2016, as well as boost its cash flow.

The company said it expects to raise $2.2 billion in debt to fund the two deals, which are expected to close by the third quarter.

Aspen was acquired by Welsh Carson-backed USPI in 2000 and became an independent company majority owned by Welsh Carson in 2012 after a USPI restructuring. Aspen will not be a part of Tenet's joint venture with USPI.

The Wall Street Journal on Sunday reported Tenet was nearing a deal to buy USPI. (http://on.wsj.com/1LM0jsA)

J.P. Morgan (Other OTC: MGHL - news) and Lazard are Tenet's financial advisers and Gibson, Dunn & Crutcher is its legal counsel.

USPI and Aspen are being advised by Barclays (LSE: BARC.L - news) and Goldman Sachs. USPI's legal adviser is Ropes & Gray LLP. (Reporting by Natalie Grover in Bengaluru; Editing by Savio D'Souza)