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Tenet Rejects, CHS Withdraws 'Final Offer'

Margaret Dick Tocknell, for HealthLeaders Media, May 10, 2011

In a unanimous vote, the Tenet Healthcare board once again rejected Monday an unsolicited offer from Community Health Systems Inc. to acquire the Dallas-based healthcare services company.

In a statement issued Monday evening, Community Health Systems announced that it "has withdrawn its offer" to acquire all of the outstanding shares of Tenet's common stock and has also "withdrawn its nominees" for election to Tenet's board.

The most recent CHS offer dated May 2, 2011 proposed to acquire all of the outstanding shares of Tenet for $7.25 per share cash or about $4.1 billion.

In a letter dated May 9 and released Monday morning, Tenet CEO Travis Fetter and Tenet board chair Edward A. Kangas told Wayne T. Smith, board chair, president and CEO of CHS, that the May 2 offer "grossly undervalues the company and is not in the best interests of Tenet or its shareholders. In addition, as we have indicated to you previously, the Tenet board has serious concerns about Community Health's ability to consummate the proposed transaction. Our board believes that Community Health's latest proposal does not reflect our current financial position, our strong 2011 outlook, and our positive future growth prospects. We are confident that the execution of Tenet's current business strategy will deliver greater value than Community Health's inadequate proposal."

The Tenet board considered, among other things, the opinion of Barclays Capital as of May 8, 2011 that the price proposed by CHS was inadequate to Tenet shareholders from a financial perspective, according to a media release.

Franklin, Tenn.-based CHS had earlier termed its May 2 offer for Tenet as "its best and final offer." In a statement announcing the offer, CHS's Smith said "unless we see meaningful engagement by May 9, 2011, we will withdraw the offer and move on to the many other compelling growth opportunities available to us." At that time Smith also said that CHS would withdraw its 10-person slate of nominees for the Tenet board if the latest offer was rejected.

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