By: Texas Business Posted: Tuesday, December 14, 2010 10:16 am
Texas Business reports: Dallas-based Tenet Healthcare Corporation rejected a $7.3 billion buyout offer from Tennessee-based Community Health Systems Inc.
In a prepared statement, Tenet Healthcare confirmed it rejected the proposal to acquire all of the outstanding shares of Tenet for $6 per share in cash and stock, stating that it was identical to a proposal it rejected in November.
The Tenet board of directors, after consultation with its financial and legal advisors, “unanimously determined that the prior Community Health proposal was not in the best interests of Tenet or its shareholders.”
In making its determination, the Tenet board “considered that Community Health’s opportunistic proposal would transfer the growth potential inherent in Tenet to Community Health without adequately compensating Tenet shareholders. The Tenet board believes that the interests of Tenet shareholders would be better served by benefiting from 100 percent of the upside inherent in Tenet rather than accepting Community Health’s inadequate proposal. In addition, the Board has serious concerns about Community Health’s ability to integrate and operate a business like Tenet.
In a letter to Community, the board stated that the proposal is “opportunistic, grossly undervalues Tenet and fails to reflect Tenet’s prospects for continued growth and shareholder value creation.”
In addition, the letter stated that “Community Health’s stock appears to be over-valued and is not a desirable currency for Tenet shareholders.”
“Given that Community Health is offering a portion of consideration in Community Health stock, it is imperative that Tenet shareholders understand fully the risks inherent in the value of your stock. We are concerned that your growth has slowed dramatically and future “guidance” will be difficult to achieve. You indicated to Tenet’s CEO on November 12 that “we all know 2011 will be a very tough year.”
Barclays Capital is acting as financial advisor to Tenet. Gibson,Dunn & Crutcher LLP and Debevoise & Plimpton LLP are acting as Tenet’s legal counsel.
Community Health responded with a letter of its, stating it would publicly disclose the offer: