Tenet rejects sweetened Community Health offer
NEW YORK |
Community Health sweetened its hostile bid earlier this month, changing its $6 per share offer to all cash from $1 in Community Health stock and $5 in cash. The move was meant to protect Tenet shareholders from any risk associated with the stock of Community Health, which is currently the subject of a U.S. government probe into billing practices.
The board of Tenet said in a statement on Friday that after consultations with advisors, it had determined that the revised bid is "not in the best interest of Tenet or its shareholders," saying the $6 per share price was the same as its initial offer made back in November.
Tenet Chief Executive Trevor Fetter said that since the November offer the company "has demonstrated improving business trends, including the best fourth quarter results in seven years. In addition, industry fundamentals are improving, and Tenet's Outlook for 2011 and longer-term financial performance reflects strong growth."
Community Health was not immediately available for comment.
In a letter to Community Health, CEO Fetter and Chairman Edward Kangas said they "have never been opposed to a sale," but raised a number of objections to the current offer.
Aside from the price, they pointed to concerns "regarding disclosure and regulatory compliance" that were the basis of a lawsuit Tenet filed against Community Health on April 11.
Tenet's lawsuit accuses Community Health of admitting patients for needless stays and bilking the U.S. government and private insurers. Community Health, the second-largest U.S. hospital chain, has asked the courts to dismiss the lawsuit.
Meanwhile, Community Health has also disclosed that the U.S. government had subpoenaed the company in connection with an investigation of possible improper claims submitted to Medicare and Medicaid.
Community Health has argued it would gain greater operating efficiencies and leverage for negotiating with insurers and recruiting physicians, providing a compelling strategic rationale for the transaction. The combined companies would have 176 hospitals in 30 states and an estimated revenue of $21.9 billion.
Community Health has said it intends to present a full slate of 10 independent director nominees for election to Tenet's board at its 2011 annual meeting. That meeting has been delayed until November 3, and the entire board is up for re-election, Community Health said.
Shares of Community Health fell 20 cents to $30.69 on Thursday, while Tenet shares rose 6 cents to $6.77. U.S. stock markets were closed Friday.
(Reporting by Paul Thomasch; Editing by Marguerita Choy)
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