Goldman Sachs: First Take On CYH / THC Merger Considerations

Goldman Sachs reports that Community Health Systems, Inc. CYH has made an offer to purchase Tenet Healthcare Corporation THC for $6/share ($5 cash, $1stock), a 40% premium to THC's closing price, reflecting 7.6x EV/EBITDA (TTM). “CYH expects the deal would be accretive to EPS in the first full year and sees ‘significant synergy potential,'” Goldman Sachs writes. “THC has rejected the offer.” For comparison purposes, Goldman Sachs notes that Community Health offered 9x EV/EBITDA (TTM) for Triad in 2007. Over the past 10 years, THC shares have traded at a median EV/NTM EBITDA of 8.4x. Community Health Systems closed Thursday at $31.64; Tenet Healthcare closed at $4.29.