NEW YORK (TheStreet) -- Tenet Healthcare (THC) - Get Report stock plunged by nearly 20% Tuesday as investors registered their displeasure with the company's decision to jump into the takeover fray for Healthscope, an Australian health care management company.
In afternoon trading, Tenet shares were changing hands at $4.70, down $1.02, or 18%, on volume of 26 million shares, more than double the daily average turnover in the name.
Tenet, which reportedly offered A$5.80 a share for Healthscope, confirmed in a press release Tuesday that it's in preliminary discussions to acquire the firm.
Healthscope, the second-largest private hospital corporation in Australia, is also being sought by private equity firms
Kohlberg Kravis Roberts
CVC Asia Pacific
, both of which have offered A$5.80 a share, according to reports.
Meanwhile, a club including
have reportedly bid A$5.75 a share.
Tenet tried hard to sell the deal in its press release, noting that Healthscope owns and operates 43 hospitals representing about 15% of Australia's private-hospital market. Tenet also said that more than 40% of the Australian population is covered by private health insurance, and that "private hospital expenditures are expected to realize a mid-single digit real rate of growth for the foreseeable future."
According to the company, "the acquisition, if consummated, will only be completed at a price which creates value for its shareholders." The deal would also "improve Tenet's payer mix, and enhance Tenet's margins and growth rates both currently and for the long-term."
Tenet said its domestic business "continues to perform" and that it "believes its current 2010 outlook for EBITDA and cash flow is conservative." Patient volumes through the end of May "remain favorable relative to the first quarter ... with May results improving relative to both April and March," Tenet said in the release.
The company will provide additional detail on its full-year outlook at the
investor conference on June 15, it said.
-- Reported by Andrea Tse in New York
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