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Tenet (THC) to Divest 3 Hospitals to Novant to Reduce Debt

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Tenet Healthcare Corporation (THC - Free Report) recently agreed to divest three hospitals and related operations in South Carolina to Novant Health, an integrated network of medical facilities. The deal with the private entity is likely to fetch around $2.4 billion cash ($1.75 billion after tax).

The deal encompasses hospitals in Jasper, Beaufort and Charleston counties in South Carolina, along with affiliated physician practices and related hospital operations. However, THC plans to retain its ambulatory facilities, which are operated by its subsidiary, United Surgical Partners International.

The hospitals and related operations have generated around $552 million in revenues in the year ended Sep 30, 2023. During this time, the assets witnessed adjusted EBITDA of around $150 million, excluding certain items. THC expects the deal to provide a pre-tax book gain of almost $1.6 billion.

The company intends to use the proceeds from the deal to reduce debt. At the third quarer-end, it had long-term debt, net of the current portion, of $14.9 billion and short-term debt of $141 million. The transaction is slated for completion in the first quarter of 2024.

As part of the agreement, Tenet's subsidiary, Conifer Health Solutions, will engage in an extended 15-year contract to deliver revenue cycle management services for the three hospitals and associated operations. The move highlights Tenet's concerted efforts to reshape its portfolio and enhance financial flexibility. The divestiture aligns with its focus on optimizing its asset mix and reducing debt burden, aiming to improve overall financial health and operational efficiency.

In other news, the Federal Trade Commission authorized a lawsuit to block Tenet's proposed $142.5 million divestment deal of its San Ramone Regional Medical Center to John Muir Health. The regulatory body cites concerns over potential competition issues in the region, likely leading to increased healthcare costs.

Price Performance

Shares of THC have gained 48% in the past year compared with the 5.7% rise of the industry.

Zacks Investment Research
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Zacks Rank and Key Picks

Tenet currently has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader Medical space are Enovis Corporation (ENOV - Free Report) , Centene Corporation (CNC - Free Report) and Molina Healthcare, Inc. (MOH - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Enovis’ current-year earnings implies a 4.9% increase from the year-ago reported figure. The consensus mark for its current-year revenues is pegged at $1.7 billion. ENOV beat earnings estimates in all the last four quarters, with an average surprise of 11%.

The Zacks Consensus Estimate for Centene’s 2023 earnings indicates a 14.9% year-over-year increase to $6.64 per share. It has witnessed eight upward estimate revisions over the past 30 days against no movement in the opposite direction. The consensus mark for CNC’s 2023 revenues indicates 4.4% growth from a year ago.

The Zacks Consensus Estimate for Molina Healthcare’s 2023 bottom line is pegged at $20.83 per share, suggesting 16.2% year-over-year growth. It beat earnings estimates in all the last four quarters, with an average surprise of 7.5%. The consensus mark for MOH’s current year revenues indicates 4.3% growth from a year ago.

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