Why Healthcare Service Provider Tenet Shares Are Up Today

Tenet Healthcare Corp (NYSE: THC) shares are trading higher after it inked a deal with Novant Health to sell three hospitals and related operations in South Carolina for around $2.4 billion in cash.

The company expects after-tax proceeds of about $1.750 billion from the sale transaction, which include Coastal Carolina Hospital in Jasper County, East Cooper Medical Center in Charleston County, Hilton Head Hospital in Beaufort County, related physician practices, and other hospital operations. 

Tenet will retain ambulatory facilities operated by United Surgical Partners International (USPI) in these markets.

As per the purchase deal, Tenet's Conifer Health Solutions subsidiary will ink a new and expanded fifteen-year contract to offer revenue cycle management services for the South Carolina hospitals and related operations.

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Tenet anticipates using the proceeds primarily for debt retirement. For the last 12 months ended September 30, 2023, the three hospitals and related operations included in the sale generated revenues of approximately $552 million.

The company estimates recording a pre-tax book gain of approximately $1.6 billion due to this anticipated transaction. The transaction is expected to close in Q1 2024.

Last month, THC reported Q3 net operating income of $101 million ($0.94 per share), down from the $131 million ($1.16 per share) in the prior year and adj. EPS of $1.44, beating the consensus of $1.20. 

Price Action: THC shares are up 4.92% at $61.00 premarket on the last check Friday.