Community Health Systems Inc. has raised its offer for a takeover of Tenet Healthcare Corp. by 20 percent in what is its final attempt to close a deal between the two rival hospital operators.
The new offer of $7.25 cash per Tenet share represents in increase of more than 20 percent over CHS' latest all cash offer of $6 per share made last week and promptly rejected by Tenet's management as inadequate. The current offers value Tenet at slightly more than $4 billion.
[See also: Tenet rejects $3.3B buyout offer from Community Health Systems]
In a letter to Tenet's Board of Directors, Wayne T. Smith, chairman, president, and CEO of CHS said "It is time to move beyond lawsuits and rhetoric." It also provided a deadline for the two companies to enter negotiations aimed at completing a deal. Barring the start of "good-faith discussions" CHS will permanently withdraw its offer for Tenet on May 9 and will also withdraw its nominees for election to Tenet's Board of Directors.
"We are making this offer to bring this matter to a prompt conclusion in the best interests of all concerned," Smith said in a statement. "We call on the Tenet Board to uphold its fiduciary duties and enter into good-faith discussions with us to conclude a mutually beneficial transaction."
Tenet had no immediate comment on the revised offer other than to note it has received the offer and "will review the revised proposal to determine the course of action that it believes is in the best interests of the Company and its shareholders."
The latest offer comes five months after CHS first sought to acquire Tenet in early November. When Tenet rejected the initial overture about a month later, CHS took its bid hostile, offering a $6 per share for Tenet in a combination of cash and stock. While the initial offer represented a premium of more than 40 percent for Tenet at the time, Tenet shares have consistently traded higher than the $6 primarily based on speculation that a deal could be imminent as well as the possibility that a second suitor could emerge and spark a bidding war.
In the ensuing four months since taking it bid hostile, both companies have employed various maneuvers in an attempt to gain advantage, the most recent a lawsuit filed by Tenet against CHS alleging admissions practices that may have resulted in more than $280 million of overbilling to Medicare. Last week, CHS strongly defended itself against those allegations in a conference call announcing its first quarter financial results.
[See also: Community Health Systems: Tenet lawsuit is 'contrived and biased']
It is likely Tenet will also reject the latest offer as many industry analysts have pegged fair value for the company in the $8 to $9 per share range. It is also likely Tenet's shares could suffer in the short term if the Community Health Systems offer comes off the table.
The market has reacted to the news today with caution. In early trading, Tenet shares were down 4.3 percent to $6.63 per share. Community Health Systems shares were off about 0.6 percent at $30.55.