dfan14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant o
Filed by a Party other than the Registrant þ
Check the appropriate box:
o Preliminary Proxy Statement
o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
o Definitive Proxy Statement
o Definitive Additional Materials
þ Soliciting Material Pursuant to §. 240.14a-12
TENET HEALTHCARE CORPORATION
(Name of Registrant as Specified in its Charter)
COMMUNITY HEALTH SYSTEMS, INC.
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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Fee computed on table below per Exchange Act Rules 14a-6(i) (4) and 0-11. |
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Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and
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Proposed maximum aggregate value of transaction: |
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Fee paid previously with preliminary materials. |
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Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
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Forward-Looking Statements
Any statements made in this communication that are not statements of historical fact, including
statements about our beliefs and expectations, including any benefits of the proposed acquisition
of Tenet Healthcare Corporation (Tenet), are forward-looking statements within the meaning of the
federal securities laws and should be evaluated as such. Forward-looking statements include
statements that may relate to our plans, objectives, strategies, goals, future events, future
revenues or performance, and other information that is not historical information. These
forward-looking statements may be identified by words such as anticipate, expect, suggest,
plan, believe, intend, estimate, target, project, could, should, may, will,
would, continue, forecast, and other similar expressions.
These forward-looking statements involve risks and uncertainties, and you should be aware that many
factors could cause actual results or events to differ materially from those expressed in the
forward-looking statements. Factors that may materially affect such forward-looking statements
include: our ability to successfully complete any proposed transaction or realize the anticipated
benefits of a transaction, our ability to obtain stockholder, antitrust, regulatory and other
approvals for any proposed transaction, or an inability to obtain them on the terms proposed or on
the anticipated schedule, uncertainty of our expected financial performance following completion of
any proposed transaction and other risks and uncertainties referenced in our filings with the
Securities and Exchange Commission (the SEC). Forward-looking statements, like all statements in
this communication, speak only as of the date of this communication (unless another date is
indicated). We do not undertake any obligation to publicly update any forward-looking statements,
whether as a result of new information, future events, or otherwise.
Additional Information
This communication does not constitute an offer to sell or the solicitation of an offer to buy any
securities. This communication relates to a business combination transaction with Tenet
proposed by Community Health Systems, Inc. (CHS), which may become the subject of a registration
statement filed with the SEC. CHS intends to file a proxy statement with the SEC in connection with
Tenets 2011 annual meeting of shareholders. Any definitive proxy statement will be mailed to
shareholders of Tenet. This material is not a substitute for any prospectus, proxy statement or any
other document which CHS may file with the SEC in connection with the proposed transaction.
INVESTORS AND SECURITY HOLDERS ARE URGED TO READ ANY SUCH DOCUMENTS FILED WITH THE SEC CAREFULLY IN
THEIR ENTIRETY IF AND WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION
ABOUT THE PROPOSED TRANSACTION. Such documents would be available free of charge through the web
site maintained by the SEC at www.sec.gov or by directing a request to Community Health
Systems, Inc. at 4000 Meridian Boulevard, Franklin, TN 37067, Attn: Investor Relations.
Participant Information
CHS and its directors, executive officers and nominees may be deemed to be participants in the
solicitation of proxies in connection with Tenets 2011 annual meeting of shareholders. The
directors of CHS are: Wayne T. Smith, W. Larry Cash, John A. Clerico, James S. Ely III, John A.
Fry, William N. Jennings, M.D., Julia B. North and H. Mitchell Watson, Jr. The executive officers
of CHS are: Wayne T. Smith, W. Larry Cash, David L. Miller, William S. Hussey, Michael T. Portacci,
Martin D. Smith, Thomas D. Miller, Rachel A. Seifert and T. Mark Buford. The nominees of CHS are:
Thomas M. Boudreau, Duke K. Bristow, Ph.D., John E. Hornbeak, Curtis S. Lane, Douglas E. Linton,
Peter H. Rothschild, John A. Sedor, Steven J. Shulman, Daniel S. Van Riper, David J. Wenstrup,
James O. Egan, Jon Rotenstreich, Gary M. Stein and Larry D. Yost. CHS and its subsidiaries
beneficially owned approximately 420,000 shares of Tenet common stock as of January 7, 2011.
Additional information regarding CHSs directors and executive officers is available in its proxy
statement for CHSs 2010 annual meeting of stockholders, which was filed with the SEC on April 9,
2010. Other information regarding potential participants in such proxy solicitation and a
description of their direct and indirect interests, by security holdings or otherwise, will be
contained in the proxy statement that CHS intends to file with the SEC in connection with Tenets
2011 annual meeting of shareholders.
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On February 8, 2011, Wayne T. Smith, Chairman and Chief Executive Officer of Community Health
Systems, Inc. (CHS), spoke at the UBS Global Healthcare Services Conference. Some of his remarks
included a discussion of CHSs proposed acquisition of Tenet Healthcare Corporation (Tenet) and
the expected proxy solicitation in connection with Tenets 2011 annual meeting of shareholders.
Below are excerpts from the transcript of the conference relating to Tenet.
[Excerpted from the remarks of Wayne T. Smith]
Now,
speaking of acquisitions, you may have heard this or not, Im
not sure if the words out
about this, but we made an unsolicited offer for Tenet on November 12. As you know, Ill kind of
tell you a little of the details here. We sent a letter on November 12. We received a sharp return
on December 6 that said not even remotely favorable. Then two days later, on December 8, we
received a five-page letter to tell us all the reasons that this was not a good idea for them
hurt my feelings.
But a process is underway and we this is a very compelling story when you look at the
opportunity here in terms of the fit and the synergies, the opportunity to leverage the
efficiencies and best practices and enhanceability to contract with payors. We have a very strong
platform for physician recruiting. Weve got a good track record. As I said earlier, we
successfully integrated Triad, which has been the largest acquisition in this industry and this
would be EPS accretive.
The offer in itself was $6 $5 cash, $1 in stock which represented a 40% premium at the time
and today their stock is trading around $6.70. Actually its a little unusual phenomenon that their
stock went up and our stock went up as well. Our stock went up more than their stock as a
percentage. But having said all that, Tenet has put in the obvious poison pills and delayed their
annual meeting. We have now proposed a slate of [directors], so we will be working along the way in
terms of the opportunities here in the future.
Good news is the investment community, everyone has been very positive about this. As you think
about it, it is a good opportunity for the industry and for the Tenet shareholders. By the way, I
get a lot of questions about price. When youre going to raise your price? Im not sure that were
ever going to raise their price, $6. We might be overpaying. Weve not done any due diligence. We
havent done any work there yet until we have an opportunity to do that. This is not a company that
has had a lot of successful performance over the last five or six years. So until we have an
opportunity, there may be something golden here that we dont know about. But so far, we dont
know, we havent been we havent worked on it at all. They havent let us in yet.
But anyway, this is how it looks. Tenet is in 11 states, were in 10 of those 11 states by the way.
It would take us from being a $13 billion company to almost a $22 billion and 176 hospitals. The
value of this back to when I said infrastructure and networks, the value of this to us is, for
example, in Texas we have 18 hospitals, we would go to 28 hospitals. As youd go by state-by-state,
there is an opportunity here in terms of the synergies and the networking on a state-by-state
basis, which would be very helpful.
A lot of these facilities are underperforming facilities. And if you know us, you know we dont buy
facilities that are in great shape, weve only bought facilities that had very little margins
historically through the years and our model has been to take those facilities and improve them up
from low single-digit margin up to maybe a 20% and Triad is a pretty good example. Weve improved
Triads margins from 11% something to 14% something over the last three years. So there is a huge
opportunity. And its this basic platform, which again we have ability to do. You can see this is
just a slide to demonstrate the size in terms of different size as a percentage of revenue, Tenet
is actually smaller than Triad.
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So if you go back and you think about our Triad acquisition and what happened, 11.9% or 12% to
14.8% in terms of margin improvement. We got in the first year $145 million in synergy. We think we
got $275 million in total out of Triad over a period of time. Triad was a $5.7 billion or $5.8
billion, this is a $9 billion company. Certainly we think there is a lot of opportunity in terms of
the synergies.
I guess to sort of conclude this, the things that Tenets Board does not know about CHS, one is
patience is a virtue. We do a lot of not-for-profit acquisitions. They take 12 to 18 months to do
that. So were comfortable with time frames around 12 to 18 months. Were not going to get too
excited. The time is actually on our side. Time is risk. As you know, operating risk is around time
for Tenet. And those of you who know us through the years in terms of all the acquisitions that
weve done, were very determined and were in for the long haul and we think we absolutely will be
successful here. So its a great opportunity for us.
And the reason we can do this is because we have not only we have the infrastructure, but we
have the manpower as well, a very capable group of people have been working together for a long,
long period of time and successfully have done the biggest integration in the last number of years.
And we clearly have the ability to assimilate this size of acquisition. We have a strong Board
Jim Ely, some of you all know, who is at J.P. Morgan for a number of years, a physician, Norris
Jennings, John Fry who is the President of Drexel. So our Board is supportive and this is a very
strong group of people.
******
Our debt-to-cap is about 80%, our debt-to-EBITDA is 5%. We currently have about $560 million in
cash in the bank, a revolver of over $600 million, and our cash flow is going to be over $1 billion
again this year. So were in good shape in terms and if we do the Tenet deal, the leverage will go
up slightly, but not much. But the cash flow significantly improves for the future.
******
So to conclude this, we think we have certainly an executable, predictable, sustainable growth
strategy. Were in very attractive markets. We got organic growth opportunities, as I mentioned
earlier, a strong base thats not matured, definitely a proven operating formula and strategic and
consistent financial performance and margin improvement. Strong expense management, market share
opportunities, case mix improvement opportunities, physician recruitment has been strong forever
here. We have some visibility around bad debt if healthcare reform happens. Acquisitions look very,
very strong as we look to the future and I havent even mentioned Tenet yet.
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