Shares of Tenet Healthcare Corp (NYSE: THC) were
trading higher by nearly 3 percent after Thursday's opening bell in reaction to
reports that the company is exploring strategic alternatives, including a potential sale of itself.
However, investors holding on to Tenet's stock under the assumption the company will be bought out at a notable premium may need
to reconsider, at least according to KeyBanc Capital Markets' Jason
Gurda.
It is "unlikely" that Tenet Healthcare will sell itself given a high level of debt and lack of interest among potential
strategic buyers, Gurda commented in a research report (see his track record here). At a $16 billion enterprise valuation, there are few companies that can
even afford the price tag for a slow growth hospital company with possible exceptions being HCA Healthcare Inc (NYSE:
HCA) and maybe Universal Health Services, Inc. (NYSE:
UHS).
However, HCA's M&A activity has historically focused on expanding in
specific geographic regions and buying Tenet Healthcare would result in a significant overlap in several markets, the analyst
noted. Also, Universal Health Services may not have an appetite for new M&A deals after adding new debt to its balance
sheet.
But what Tenet Healthcare could reasonably oversee to create value for investors is divesting individual hospitals and/or its
Conifer subsidiary. Either action would be accretive to Tenet Healthcare's stock
and accelerate de-leveraging.
However, it is unclear at this point "how far management is willing to go in breaking up the business."
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Latest Ratings for THC
Date |
Firm |
Action |
From |
To |
Aug 2017 |
Leerink Swann |
Maintains |
|
Outperform |
Aug 2017 |
Deutsche Bank |
Maintains |
|
Buy |
Aug 2017 |
Credit Suisse |
Maintains |
|
Neutral |
View More Analyst Ratings for
THC
View the Latest Analyst Ratings
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