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THC

Tenet

$16.93

0.6911 (4.26%)

, HCA

HCA Holdings

$79.16

0.22 (0.28%)

10:58
09/14/17
09/14
10:58
09/14/17
10:58

Analysts skeptical of potential for outright sale of Tenet

Shares of Tenet Healthcare (THC) are on the rise after yesterday's media reports saying the company is looking into strategic options, including a potential sale. Commenting on the news, several Wall Street analysts argued that an outright sale seems unlikely, given the company's debt level and the lack of obvious suitors. SALE SEEN AS UNLIKELY: While Citi analyst Ralph Giacobbe is not dismissing the idea of a sale after Tenet's announcement of a CEO change and board refresh, he would be "somewhat surprised" if the company is sold outright given the current operating backdrop as well as the company's high leverage and higher relative valuation. Further, the analyst told investors that he does not believe there is "appetite" from the publicly traded hospitals to do a deal and he also sees little private equity interest. Giacobbe noted, however, that he cannot dismiss the possibility of "vertical M&A," and would not be surprised if Tenet has already attempted to engage Managed Care Organizations, which he sees as unlikely buyers. His peer at RBC Capital voiced a similar opinion, saying that all of Tenet probably will not be acquired given its "significant" debt level. Analyst Frank Morgan views the Ambulatory segment as likely the most valuable asset to a potential buyer or as a spinoff once Tenet affects full USPI ownership. While Conifer could be interesting to the right buyer, the valuation might be challenged by the fact that it has one highly concentrated customer. Additionally, the analyst pointed out that HCA Holdings (HCA) may be interested in certain markets, but does not believe it would want to buy the entire hospital portfolio. Morgan does not expect any deals made by Tenet to cause its share price to increase unless it manages to sell its hospitals for rates above their current market value. Meanwhile, KeyBanc analyst Jason Gurda told investors in a note of his own that he also believes it is unlikely Tenet will find a buyer for the whole company due to its high level of debt and the likely lack of interest from potential strategic buyers. However, Gurda noted that Tenet could expand its effort to divest individual hospitals and/or its Conifer subsidiary at multiples that would be accretive to where the shares are currently trading and would accelerate de-leveraging. But it is not clear at the moment how far management is willing to go in breaking up the business, he added. All three firms have Neutral-equivalent ratings on Tenet shares. POTENTIAL TAKEOUT VALUES, SUITORS: Also commenting on the news of a possible sale, Deutsche Bank analyst Chris Rigg argued that Tenet's leverage makes for an "extremely wide" takeout price range of $21-$41 per share. The analyst noted that also difficult is determining who would actually be interested and capable of buying the company. While HCA has the financial wherewithal to undertake the deal, the companies have significant overlap and it is unclear whether there would be antitrust issues, he contended, adding that a private equity firm or an existing private equity backed hospital chain would likely make more sense. Rigg reiterated a Buy rating and $24 price target on Tenet's shares. His peer at SunTrust also views potential public suitors for tenet as "limited," as its free cash flow "remains sluggish." Analyst David MacDonald highlighted, however, that non-hospital operations generate almost 40% of adjusted EBITDA, which he would argue warrants a higher multiple. Further, MacDonald told investors that he thinks recent industry transactions suggest "potential unrealized value" and provide downside support. Overall, the analyst does not view ongoing speculation as surprising given recent news flow, the company's "intriguing collection of assets" and increased focus on shareholder value creation. He reiterated a Hold rating and a $16 price target on the shares. PRICE ACTION: In morning trading, shares of Tenet have risen 5% to $17.07.

THC

Tenet

$16.93

0.6911 (4.26%)

HCA

HCA Holdings

$79.16

0.22 (0.28%)

  • 02

    Oct

THC Tenet
$16.93

0.6911 (4.26%)

09/14/17
RHCO
09/14/17
NO CHANGE
RHCO
'Potential public suitors' for Tenet 'limited,' says SunTrust
SunTrust analyst David MacDonald says that "potential public suitors" for Tenet are "limited," while its free cash flow "remains sluggish." However, the analyst says that the company's assets are "intriguing," as its non-hospital assets are being undervalued by the market. He keeps a $16 price target and a Hold rating on the shares.
09/14/17
KEYB
09/14/17
NO CHANGE
KEYB
Tenet unlikely to find buyer for whole company, says KeyBanc
KeyBanc analyst Jason Gurda notes that Bloomberg is reporting that Tenet has hired advisers to explore strategic alternatives, including a potential sale. The analyst believes it is unlikely it will find a buyer for the whole company due to its high level of debt and the likely lack of interest from potential strategic buyers. However, Gurda does believe that Tenet could expand its effort to divest individual hospitals and/or its Conifer subsidiary at multiples that would be accretive to where the shares are currently trading and would accelerate de-leveraging. But it is not clear at the moment how far management is willing to go in breaking up the business, he adds.
09/14/17
RBCM
09/14/17
NO CHANGE
RBCM
Tenet unlikely to be acquired, says RBC Capital
After The Wall Street Journal reported that Tenet (THC) hired advisors to purse strategic options, RBC Capital analyst Frank Morgan says that all of Tenet probably won't be acquired, given its "significant" debt levels. He says that the company's ambulatory unit is the most likely part of the company to be sold or spun off. The analyst says that HCA (HCA) could be "interested" in some of Tenet's markets, but he does not believe that it wants to buy all of Tenet's hospitals. The analyst does not expect any deals made by Tenet to cause its share price to increase unless it manages to sell its hospitals for rates above their current market value. Morgan keeps a Sector Perform rating on the stock.
09/14/17
DBAB
09/14/17
NO CHANGE
Target $24
DBAB
Buy
Deutsche sees wide range of potential takeout values for Tenet
Deutsche Bank analyst Chris Rigg believes Tenet Healthcare's (THC) leverage makes for an "extremely wide" range of potential buyout prices. After the Wall Street Journal reported that the company is exploring strategic options including a possible sale, Rigg pegs $21-$41 per share as the potential buyout range. Also difficult is determining who would actually be interested and capable of buying Tenet, Rigg tells investors in a research note. HCA Holdings (HCA) has the financial wherewithal to do a deal, but the companies have significant overlap which could bring antitrust issues, the analyst contends. He sees private equity or an existing private equity-backed hospital chain as making more sense. Rigg has a Buy rating on Tenet with a $24 price target.
HCA HCA Holdings
$79.16

0.22 (0.28%)

09/06/17
CANT
09/06/17
NO CHANGE
CANT
Overweight
Irma threat a risk for HCA, public hospital peers, says Cantor
Cantor Fitzgerald analyst Joseph France noted that HCA Holdings (HCA), Community Health (CYH), LifePoint (LPNT), Tenet (THC) and Envision Healthcare (EVHC) all have business in Florida and Texas and are all down today on the potential threat from Hurricane Irma and the impact from Hurricane Harvey last week. HCA reports nearly half of its beds are in Florida and Texas while Envision has said in the past that more than half of its anesthesia business and about half of its legacy ER business is in those two states, noted France, who adds that Community Health, LifePoint and Tenet are less exposed to those states. The analyst keeps an Overweight rating on HCA shares.
08/28/17
JEFF
08/28/17
NO CHANGE
JEFF
Buy
HCA has 11% of its beds in Harvey impacted areas, says Jefferies
Jefferies analyst Brian Tanquilut points out that HCA Holdings (HCA) has 11% of its beds in areas impacted by severe weather from Hurricane Harvey. The analyst expects the hurricane to cause a "notable disruption," specifically for hospitals, physician offices, surgery centers, and labs. Investors are likely to take a long-term view of Hurricane Harvey, however, as it is a one-time issue and thus excluded from operating and financial results, Tanquilut tells investors in a research note. He sees both Tenet (THC) and Community Health (CYH) being minimally impacted from the storm. Envision Healthcare's (EVHC) AmSurg segment has three ambulatory surgery centers in the impacted markets, while Surgery Partners (SGRY) has only one facility in Houston, the analyst adds.

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VNO

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ORIG

Ocean Rig UDW

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BBBY

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BBU

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MXWL

Maxwell

$6.29

-0.24 (-3.68%)

16:40
09/19/17
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Syndicate
Maxwell files to sell $50M of convertible senior notes due 2022 »

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IOVA

Iovance Biotherapeutics

$8.55

0.3 (3.64%)

16:38
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FB

Facebook

$172.52

2.51 (1.48%)

16:37
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Periodicals
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  • 22

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ELS

Equity Lifestyle

$87.87

-0.23 (-0.26%)

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BBBY

Bed Bath & Beyond

$27.03

-0.27 (-0.99%)

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MXWL

Maxwell

$6.29

-0.24 (-3.68%)

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MRCY

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ALOG

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FDX

FedEx

$216.00

0.92 (0.43%)

16:26
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GEMP

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