Wall Street analysts don't expect Tenet Healthcare Corp. (THC) to be swallowed whole in a blockbuster deal, despite buzz generated by a Wall Street Journal report late Wednesday, Sept. 13, that the activist-pressured hospital operator was exploring strategic options, including a sale of the company.

Tenet shares were up 5.6%, or 91 cents, to $17.15 through late morning trading Thursday.

Jason Gurda of KeyBanc Capital Markets said a more likely scenario for Tenet is to divest individual hospitals to various buyers as Community Health Systems Inc. (CYH) has done and possibly to shed a major subsidiary.

"We believe it is unlikely [Tenet] will find a buyer for the whole company due to THC's high level of debt and the likely lack of interest from potential strategic buyers," Gurda wrote in a note Thursday morning.

He added that with an enterprise value of more than $16 billion, only HCA Healthcare Inc. (HCA) and maybe Universal Health Services Inc. (UHS) are the only rival hospital operators capable of carrying out an acquisition of Tenet but doubted either would be interested.

"Both companies' historical growth historical growth strategies make that unlikely," he said.

HCA has been "very focused on expanding in specific geographies, and the companies also have significant overlap in certain markets, such as southeast Florida and on the [outpatient surgery center] side in Texas. That might require divestitures to be approved" by state and federal regulators, he said.

As for UHS, it has "shied away from most acute-care acquisitions and from adding significant amounts of debt," said Gurda.

Regarding the Tenet properties mostly likely to find buyers, Gurda pointed to low-margin hospitals that could be sold at accretive multiples, much as Community Health has done. "As CHY has shown, there is a relatively strong market for individual or small groups of acute care facilities," he wrote. Community he noted has sold dozens of hospitals at average multiples of 12-times EBITDA.

Already, Tenet has announced an agreement to sell eight U.S. hospitals and nine U.K. hospitals for nearly $1 billion. "We believe there is likely a significant opportunity to expand that effort," Gurda said.

Selling Tenet's Conifer Health Solutions subsidiary, focused on advising healthcare administrators on finances, is also an option, he said. He noted that Conifer relies on Tenet and Catholic Healthcare Initiatives for 75% of its revenues and couldn't stand on its own. But it could be attractive to another revenue cycle management company and could raise up to $1.8 billion for Tenet, Gurda predicted.

Gurda argued against a sale of Tenet's USPI ambulatory business. "It is one of the best pieces of the business that management would most likely want to hold onto it, as it has the best long-term growth outlook and cash flow profile.

Separately, analyst at RBC Capital Markets largely agreed with with KeyBanc's assessment of Tenet's sale prospects, although it did find the ambulatory business a likely asset that could be sold. USPI is most attractive as an outright sale or as a spinoff, although its heavy reliance on Tenet as a client could make suitors hesitant, RBC said.

Tenet announced last month that it would replace chairman and CEO Trevor Fetter as director and CEO amid pressure from Glenview Capital Management, an activist investor that owns a 17.8% stake in the company. Glenview is led by Larry Robbins.

Fetter is slated to resign effective March 15, 2018, or earlier if a successor is appointed.

Its current independent lead director Ronald A. Rittenmeyer assumed the role of executive chairman. The role established Rittenmeyer as the company's senior most executive.

Tenet last month also started the process to "refresh the composition of its Board." The process will ensure that future board members have the best "mix of skill and experience to maximize the future value of the company," Tenet said in August.

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