Tenet rejects higher Community Health offer
Hospital operator Tenet Healthcare Corp. on Monday rejected Community Health Systems Inc.'s latest buyout offer, which had been increased by about 21 percent.
Community's latest offer had been set to expire Monday and had said the latest proposal represented its final offer. Tenet says the offer still undervalues the company.
On May 2, Community Health made the increase offer of $4.06 billion, or $7.25 per share in cash. Tenet had already rejected Community Health's $6 per-share offer last month.
The companies have been fighting over a deal since last fall. The dispute has since spilled into federal court.
"Community Health's latest proposal does not reflect our current financial position, our 2011 outlook and our positive future growth prospects," Tenet President and CEO Trevor Fetter said in a statement.
Tenet, meanwhile, said its board of directors approved the repurchase of up to $400 million shares of common stock.
In November, Community Health had offered to buy Tenet for $5 per share in cash and $1 per share in stock. It took the offer to Tenet shareholders in December after Tenet rejected that bid. Community said in January it would nominate its own slate of directors to Tenet's board.
Tenet, based in Dallas, said in early January that it was adopting a "poison pill" stock distribution measure to deter the takeover bid. A poison pill defends a company against takeovers by diluting the holdings of an unwanted acquirer. It also has delayed its annual meeting and election of directors to November.
Tenet then filed a lawsuit in April, claiming Community Health bilks Medicare by admitting patients to its hospitals when they should only be kept under observation, a practice that Tenet said leads to artificial inflation of Community Health's stock price.
Community Health, based in Franklin, Tenn., has denied the allegation and asked a judge to dismiss the lawsuit.
Following the lawsuit filing, Community Health switched its $6-per-share offer to an all-cash offer to allay any concerns about its stock price.
Community Health runs about 130 hospitals in fast-growing and non-urban markets, while Tenet's 49 hospitals are in urban and suburban markets.