Community Health Systems Inc., the largest publicly traded hospital company, plans to nominate directors for Tenet Healthcare Corp. to advance an unsolicited $3.3 billion takeover bid.
Community Health’s plan to sponsor board candidates is “solely to help advance its inadequate and opportunistic proposal,” Tenet said today in a statement. The bid of $6 a share, consisting of $5 in cash and $1 in stock, was announced Dec. 9, and rejected by Dallas-based Tenet as “not remotely fair value.”
Community Health made 8 acquisitions in the past 2 years, and 15 since 2005. There have been 315 acquisitions in the U.S. hospital industry in the past five years, with an average purchase price of $589 million and an average premium of 8 percent, according to data compiled by Bloomberg. Mergers in the industry increased as hospital patient admissions slowed because of economic conditions, Sheryl Skolnick, an analyst at CRT Capital Group in Stamford, Connecticut, said on Dec. 10.
“It is unfortunate that Tenet’s board of directors has rejected our proposal and refused to sit down with us to discuss our premium offer,” Wayne Smith, Community Health’s chief executive officer, said in a statement today. “We intend to propose directors who will look out for the interests of Tenet shareholders.”
Tenet gained 2 cents to $6.76 at 4 p.m. in New York Stock Exchange composite trading. The shares are trading above Franklin, Tennessee-based Community Health’s bid, indicating that investors expect a higher offer. Community Health declined 23 cents, or less than 1 percent, to $36.46.
“A deal is going to happen,” Jason Gurda, an analyst with Leerink Swann & Co. in New York, said in a note to clients. He said Tenet shares are likely to rise as Community Health proceeds with the bid.
Community Health’s bid represented about a 40 percent premium over Tenet’s $4.29 closing price on Dec. 9, before the offer was announced. Community Health said at the time it also would take on about $4 billion of debt in the transaction.