Tenet Healthcare has rejected a $3.3 billion offer from Franklin, Tenn.-based Community Health Systems, calling the highly leveraged proposal "inadequate," according to a release from Dallas-based Tenet.
The CHS offer, which would include $4 billion in net debt for a total value of $7.3 billion, is "not in the best interests of Tenet or its shareholders," Tenet said. Also, the Tenet board "has serious concerns about Community Health’s ability to integrate and operate a business like Tenet."
Tenet asserted Community Health’s leverage under the proposed transaction would be "higher than all but a handful of companies in the Standard & Poor's 500," creating a company with more than $15 billion in debt. Community Health had $567 million in cash and $10.3 billion in debt as of the end of the third-quarter, according to a report by Bloomberg.
Community Health, in its release on the proposal, said combining the two systems "would be both financially and strategically compelling," creating what would be the largest hospital system in the nation, surpassing HCA. A CHS-Tenet system would have 176 hospitals in 30 states, compared with Nashville-based HCA's 163 hospitals in the U.S. and England, CHS said.
Even though the offer was rejected, Bloomberg reported that it could open the door to more offers to buy Tenet. "It remains to be seen if Community is the only bidder because Tenet is now in play," said Sheryl Skolnick at CRT Capital Group in Stamford, Conn.
Community Health has made eight acquisitions in the past two years.
Read more coverage on CHS:
- CHS Offers $3B Bid for Tenet
- CHS Enters Into Credit Extension
The CHS offer, which would include $4 billion in net debt for a total value of $7.3 billion, is "not in the best interests of Tenet or its shareholders," Tenet said. Also, the Tenet board "has serious concerns about Community Health’s ability to integrate and operate a business like Tenet."
Tenet asserted Community Health’s leverage under the proposed transaction would be "higher than all but a handful of companies in the Standard & Poor's 500," creating a company with more than $15 billion in debt. Community Health had $567 million in cash and $10.3 billion in debt as of the end of the third-quarter, according to a report by Bloomberg.
Community Health, in its release on the proposal, said combining the two systems "would be both financially and strategically compelling," creating what would be the largest hospital system in the nation, surpassing HCA. A CHS-Tenet system would have 176 hospitals in 30 states, compared with Nashville-based HCA's 163 hospitals in the U.S. and England, CHS said.
Even though the offer was rejected, Bloomberg reported that it could open the door to more offers to buy Tenet. "It remains to be seen if Community is the only bidder because Tenet is now in play," said Sheryl Skolnick at CRT Capital Group in Stamford, Conn.
Community Health has made eight acquisitions in the past two years.
Read more coverage on CHS:
- CHS Offers $3B Bid for Tenet
- CHS Enters Into Credit Extension