Community Health Systems Inc. said Monday it plans to nominate directors to Tenet Healthcare Corp.'s board at the hospital operator's 2011 annual meeting, as part of a push to take over its smaller rival.
Community Health, based in Franklin, Tenn., did not say how many directors it intended to nominate, but it noted that Tenet's entire board is up for reelection. Earlier this month, Community took its offer of $6 per share for the Dallas-based company public to rally shareholder support after Tenet's board rejected the deal as inadequate. Including assumed debt, the company values the deal at about $7.3 billion.
Community Health Chairman and CEO Wayne T. Smith said Monday in a statement that it is unfortunate that Tenet's board rejected his company's proposal "and refused to sit down with us to discuss our premium offer." He said his company plans to nominate directors who will look out for Tenet shareholder interests.
"We are convinced of the powerful logic of combining (Community Health) and Tenet and, while it remains our strong preference to proceed on a consensual basis, we are fully committed to completing this strategically and financially compelling transaction," he said.
Tenet has said the price is too low and "opportunistic," given weak industry stock valuations. It has said its board has serious concerns about Community Health's ability to integrate and operate a business like Tenet and meet its own 2011 guidance, given slowing growth.
Leerink Swann analyst Jason Gurda said Monday in a research note that he believes the deal will happen, but Tenet's response to Community Health's bid "was so hostile, in our view, that the company will have a hard time agreeing to even a modestly higher price."
The combination would create the nation's second-largest hospital chain, with 176 hospitals across 30 states and annual revenue of about $22 billion.
In morning trading, Tenet shares rose a penny to $6.75, while Community Health shares skipped 24 cents to $36.44.