A physicians group in Fort Wayne, Ind., has made an offer to buy Community Health Systems' (CYH) eight Indiana hospitals, which operate as Lutheran Health Network.
The unsolicited offer has some local support, but it's questionable whether the buyout group would be willing to pay the multiple Community Health is likely to demand.
The hospital operator is undertaking an effort to sell non-core hospitals, but the Ft. Wayne facilities are not on the company's list of hospitals slated for divestiture.
"Ft. Wayne, in our view, has long been regarded as a key market for CYH and is not included in management's current divestiture portfolio," wrote Jefferies analyst Brian Tanquilut.
Tanquilut noted that Community Health CEO Wayne Smith said during the company's first-quarter earnings call that it will consider offers for assets not on the divestiture list. The analyst cautioned, however, that the doctors group has to pay a multiple somewhat north of the 10-times Ebitda Community has been getting for other recent divestitures. The Ft. Wayne market is considered one of Community Health's most lucrative.
"We have always viewed the Lutheran Health operations as one of CYH's 'crown jewels' and believe that it would be one of the last few assets management would want to sell," Tanquilut wrote.
He added Community Health's valuation expectations would be difficult for the physicians group to meet. He also questioned whether the hospital operator, which has embarked on a campaign to re-position itself as an operator of leading regional health systems, would let go of a market that has been counted on to be a linchpin of that strategy.