Sean Williams writes on Motley Fool that Community Health Systems' bid for Tenet Healthcare is "the holy grail of all head-bangings" —where the prospective buyer is willing to load up on debt and the target thinks its recent operational improvements can overcome the stigma of scandals earlier this decade.
Community Health can talk all day about the synergies that both companies would benefit from if this merger were to go through, but in my view, this has all the makings of the goldfish getting swallowed by the cat, and the cat choking on the goldfish. I see two poorly managed companies here, and two poorly managed companies can't somehow combine to create a good company.
Dec 15, 2010 7:05 AM
Two analysts are out today with some more thoughts on Community Health Systems' hostile bid for Tenet Healthcare. A.J. Rice at Soleil Securities says CHS boss Wayne Smith can add to his bid price and still get the savings he needs to make the deal work; he has raised his target price for CHS (Ticker: CYH) to $44. Kemp Dolliver at Avondale Partners is on the same track. He says CHS can go as high as $9 and sees private-equity firms, not other hospital chains, getting involved in the bidding.
CYH's Estimates Don't Look Optimistic Given the Historical Context. Our analysis of projected first-year cost savings of previous public company acquisitions finds average cost savings of 2.0% of the target company's revenue. In addition, the difference between Community's and Triad's EBITDA margins (140bps) is essentially the same as Community's and Tenet's margins (150bps).
Dec 13, 2010 12:59 PM
Following Community Health Systems' bid to buy Tenet Healthcare, Fitch Ratings put its ratings on CHS' $8.9 billion in outstanding debt on 'rating watch negative.'
Fitch believes that should Community be successful in its bid to acquire Tenet, it will add pressure to Community's credit profile. Based on what is known about the terms of Community's bid for Tenet, the transaction as currently contemplated could add roughly $2.7 billion in debt to the consolidated capital structure.For more coverage of the CHS acquisition bid, click here and here.
Dec 13, 2010 7:38 AM
Several analysts covering hospitals, including Avondale Partners' Kemp Dolliver, have been pounding the table in recent months, saying the sector's stocks are being undervalued by investors. Dolliver today wrote to clients that Community Health Systems' bid for Tenet Healthcare vindicates his thesis. It's also lifted the few other publicly traded hospital chains, including LifePoint Hospitals, which ended the day up more than 5 percent.
Dec 10, 2010 3:11 PM
If Community Health Systems is successful in its bid to purchase Tenet Healthcare Corp. for $7.3 billion, it will create a hospital company second only to HCA Inc. in terms of revenue and number of beds. It will also make CHS look more like its Nashville peer, said CHS CEO Wayne Smith — something he thinks should be attractive to investors. "If we think about companies like HCA, who's done a great job over the last number of years, this is very similar to their profile now," Smith said on a call with investors this morning. "And if you like HCA and the margins they get, you'll probably like this transaction as well." Tenet, with 50 hospitals, operates larger facilities in more urban markets than CHS, which focuses mostly on small and mid-size markets. For NashvillePost.com's other coverage of CHS' bid for Tenet, click here.
Dec 10, 2010 2:11 PM
Analysts disagree on whether hostile bid will spark other offers
Dec 10, 2010 1:42 PM
Smith leans on Triad experience in answering integration questions; 'We've been accused of being opportunistic, and we are'
Dec 10, 2010 12:25 PM
Citigroup analyst Gary Taylor, one of a bunch of Wall Streeters reacting to CHS' $7 billion offer to buy Tenet Healthcare, says "a majority of shareholders" may warm up to the prospect of a deal around $6.50 — which just happens to be exactly where Tenet (Ticker: THC) is trading right now. Taylor says it's hard for him to be critical of CHS strategy given the company's success in buying and integrating Triad Hospitals three years ago. He says investors should consider buying CHS (Ticker: CYH) on today's dip. Consider that done. Elsewhere on the Street, both Raymond James and Lazard have lowered their ratings on CHS shares.
Dec 10, 2010 9:07 AM
The Wall Street Journal's coverage of Community Health Systems' $7.3 billion unsolicited bid to buy Tenet Healthcare Corp. examines the deal through the lens of health care reform. From the story:
The Community Health offers are the clearest indication yet that the federal health overhaul law is accelerating a wave of consolidation within the hospital industry. That wave started before President Barack Obama signed the sweeping legislation in March, but it is kicking into high gear as hospitals try to prepare for sweeping changes in the way they coordinate treatments for patients and work with doctors. The law aims to redesign the medical system so that hospitals and other health-care providers are paid for providing coordinated care to patients instead of for every test and operation they perform. Because of this, hospitals say, it makes sense to buy up other hospital groups and doctors' practices to make it easier to provide an umbrella care organization. Hospitals are also trying to buffer the hit they expect from the law's steep government payment cuts and from the coming threat of a more consolidated health-insurance industry. Being bigger will give them more power to negotiate the prices insurers pay them.
Dec 10, 2010 7:04 AM
After being rebuffed, local company goes public with offer that would create $22B company [Updated 9 p.m.: Tenet calls offer 'inadequate' and 'opportunistic']
Dec 9, 2010 5:09 PM