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Community Health (CYH) to Vend Rockwood Health System

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Community Health Systems, Inc. (CYH - Free Report) recently announced that its affiliates have inked a definitive deal with MultiCare Health System. Per the agreement, the former will divest Rockwood Health System and its associated assets to the later for $425 million. The properties to be sold – all of which are in Washington – include Deaconess Hospital of Spokane with the capacity of 388 beds, Valley Hospital in the Spokane Valley with 123 beds and the multi-specialty Rockwood Clinic.

The transaction is subject to customary regulatory approvals but is expected to be completed in the first quarter of 2017. Community Health is a highly levered company and hence, plans to deleverage its balance sheet by paying off debt using the funds procured from this divestiture.

We believe that Rockwood Health System is well positioned for success in the future. Hence, the acquisition of this thriving regional health system with a robust network across the Pacific Northwest is likely to be substantially beneficial for MultiCare Health.

Community Health remains focused on inorganic growth through strategic initiatives. To this end, the company frequently opts for mergers, acquisitions as well as divestures. Management believes that shedding small assets should help the company in focusing on core business and in turn, generate higher returns.

Earlier, Community Health’s subsidiaries had agreed to divest four hospitals and their associated assets to the subsidiaries of Curae Health, Inc. The agreement, which was inked in Sep 2016,was also targeted to lower debt using the net proceeds the transaction.

Apart divestures, spin-offs are another preferred s trategy of Community Health. In Apr 2016, the  company completed the spin-off of Quorum Health Corporation.



Zacks Rank and Stocks to Consider

The company presently carries Zacks Rank #5 (Strong Sell). The company has missed expectation in three of the last four quarters with an average miss of 69.49%.

However, investors can look at some better-ranked stocks from the medical sector like WellCare Health Plans Inc. (WCG - Free Report) , Magellan Health Inc. (MGLN - Free Report) and Humana Inc. (HUM - Free Report) .

Magellan delivered positive surprise in three of the last four quarters with an average beat of  42.58%. The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

WellCare delivered positive surprises in all of the last four quarters with an average beat of 40.01%. The company also has a Zacks Rank #1.

Humana delivered positive surprise in three of the last four quarters with an average beat of 1.94%. It carries a Zacks Rank #2 (Buy).

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