Is Community Health The Right Prescription For Tenet?

Community Health (NYSE:CYH) is taking a time-tested route in its efforts to seal a deal to acquire fellow hospital operator Tenet Healthcare (NYSE:THC) - if you cannot get the other company's board of directors to say "yes," take the negotiations public and hope that your target's shareholders force the matter. While Tenet's arguments for rejecting the deal are not without merit, the 50% jump in Tenet's stock price suggest that shareholders would like a deal and expect an improved offer to come. 

The Deal That Community Health Wants
Community Health, an operator of 126 hospitals in largely suburban areas or small communities, is offering a $7.3 billion deal to Tenet shareholders, including an equity offer of $3.3 billion. In addition to taking on Tenet's substantial debt, CYH would give Tenet shareholders $6 per share in consideration for their shares - $5 in cash and $1 in CYH stock. That deal would have represented a 40% premium for THC shares. (For more, see Mergers And Acquisitions: Understanding Takeovers.)

All in, this would create a hospital operator with 176 locations in 30 states. In contrast to CYH, Tenet operates mostly in urban areas, so there would not be all that much overlap between the two companies. Moreover, this would create the largest hospital operator in the country, surpassing once-public HCA and its 163 hospitals across 20 states. It would also create a highly-leveraged company, with upwards of $15 billion in debt being serviced by less than $3 billion in EBITDA.


Please click below for the full piece:
http://stocks.investopedia.com/stock-analysis/2010/Is-Community-Health-The-Right-Prescription-For-Tenet-CYH-THC-HMA-LPNT-UHS-MDTH-AMSG1214.aspx