Even though Tenet Healthcare Corp. immediately rejected an offer from Community Health Systems to buy the Dallas-based system, the takeover bid may not be over yet, according to a report by the Dallas Morning News.
Tenet said the $7.3 billion offer was not "even remotely fair value," but Community Health might well raise its offer, in which case shareholders would be tempted to accept the deal, said Jason Gurda, an analyst with Leerink Swann Healthcare Equity Research. Community Health's offer comes to about $6 per share, but the company has the resources to raise its offer to a little more than $7 a share, he said.
However, $4 billion of Community Health's $7.3 billion offer is in the form of debt, on top of $8.9 billion in debt outstanding that the company had as of Sept. 30, 2010. The Fitch Ratings Release cited that debt as a key reason it put Community Health on "Rating Watch Negative" after its offer for Tenet was released. "Fitch believes that should Community be successful in its bid to acquire Tenet, it will add pressure to Community's credit profile," the ratings agency said.
But Mr. Gurda said Community Health is not easily deterred when going after an acquisition. For example, it paid a 9 percent premium over the share price when it acquired the Plano, Texas-based Triad Hospitals in 2007.
And even if Community Health drops out, Mr. Gurda said other companies could be potential bidders for Tenet, such as Health Management Associates, based in Naples, Fla.
Read the Dallas Morning News report on Tenet.
Read the Fitch Ratings Release on Community Health Systems.
Read more coverage of CHS and Tenet:
- Tenet Rejects $3.3B Bid From Community Health Systems
- CHS Offers $3.3B Bid for Tenet
- CHS Enters Into Credit Extension
Tenet said the $7.3 billion offer was not "even remotely fair value," but Community Health might well raise its offer, in which case shareholders would be tempted to accept the deal, said Jason Gurda, an analyst with Leerink Swann Healthcare Equity Research. Community Health's offer comes to about $6 per share, but the company has the resources to raise its offer to a little more than $7 a share, he said.
However, $4 billion of Community Health's $7.3 billion offer is in the form of debt, on top of $8.9 billion in debt outstanding that the company had as of Sept. 30, 2010. The Fitch Ratings Release cited that debt as a key reason it put Community Health on "Rating Watch Negative" after its offer for Tenet was released. "Fitch believes that should Community be successful in its bid to acquire Tenet, it will add pressure to Community's credit profile," the ratings agency said.
But Mr. Gurda said Community Health is not easily deterred when going after an acquisition. For example, it paid a 9 percent premium over the share price when it acquired the Plano, Texas-based Triad Hospitals in 2007.
And even if Community Health drops out, Mr. Gurda said other companies could be potential bidders for Tenet, such as Health Management Associates, based in Naples, Fla.
Read the Dallas Morning News report on Tenet.
Read the Fitch Ratings Release on Community Health Systems.
Read more coverage of CHS and Tenet:
- Tenet Rejects $3.3B Bid From Community Health Systems
- CHS Offers $3.3B Bid for Tenet
- CHS Enters Into Credit Extension