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Tenet Scraps $350M Hospital Deal As US Regulator Files Lawsuit
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Tenet Scraps $350M Hospital Deal As US Regulator Files Lawsuit

Tenet Healthcare Corp. has pulled out from a $350 million deal to sell two hospitals and other related facilities in the Memphis area due to regulatory concerns.

On Dec. 12, Tenet (THC) had agreed to sell two of its Memphis-area hospitals to Methodist Le Bonheur Healthcare. However, on Nov. 13, the U.S. Federal Trade Commission (FTC) filed a lawsuit against the deal.

The company said in an SEC (Securities and Exchange Commission) filing that, “it no longer intends to pursue the Proposed Transaction. The Company withdrew its Sale Submission on December 23, 2020 and is working with the FTC to effectuate dismissal of the federal and administrative proceedings.” (See THC stock analysis on TipRanks)

According to a Reuters estimates, the deal would have given Methodist Le Bonheur Healthcare a 60% market share as the company already has four hospitals in the Memphis area.

On Dec. 10, Tenet agreed to acquire up to 45 ambulatory surgery centers from SurgCenter Development. Shortly after the announcement, Mizuho Securities analyst Ann Hynes raised the stock’s price target to $48 (18.4% upside potential) from $32 as she believes that the 45-center deal would help the company to diversify its business and generate significant earnings accretion. Hynes maintained a Buy rating on the stock.

Meanwhile, the rest of the Street has a cautiously optimistic outlook on the stock. The Moderate Buy analyst consensus is based on 6 Buys and 4 Holds. The average price target stands at $45.1 and implies upside potential of about 11.3% to current levels. Shares were up 6.6% year-to-date.

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