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Tenet explores sale of Conifer unit amid investor pressure
[DALLAS] Tenet Healthcare Corp said on Tuesday it would explore a sale of its Conifer unit and cut US$100 million more in costs, the latest measures to jolt its business amid mounting pressure from its largest shareholder.
The news is four months after Glenview Capital Management pulled its two representatives off the company's board, citing "irreconcilable differences" over strategy.
Conifer provides technology and financial services to hospitals and healthcare companies. The unit had sales of US$1.57 billion in 2016, which was about 8 per cent of Tenet's total operating revenue.
But in the latest second quarter, the unit had lower-than-expected sales, leading Tenet to slash full-year 2017 earnings.
Tenet is trying to boost margins in its hospital segment and appease Glenview, which holds almost 18 per cent of its shares, by aggressively slashing costs and shaking up management.
Glenview declined to comment.
In the last few months, debt-laden Tenet said it would lay off about 1,300 employees to save US$150 million next year, replace longtime Chief Executive Trevor Fetter and refresh its board.
Ronald Rittenmeyer, the acting chief executive, has clearly taken the "bull by the horns", Mizuho analyst Sheryl Skolnick wrote in a client note.
Fetter is expected to leave the company in March, 2018.
Tenet has long-term debt of about US$15 billion as of June 30.
It now expects cost cuts of US$250 million by the end of 2018.
Tenet said it hired Goldman Sachs & Co LLC as its financial adviser and Kirkland & Ellis LLP as legal adviser for Conifer's proposed sale. A decision would be made during the first half of 2018.
Tenet also said on Tuesday it expects 2018 adjusted profit per share of US$1.07 to US$1.36.
Analysts on average were expecting $1.27 per share, according to Thomson Reuters I/B/E/S.
The company also forecast net operating revenue of US$17.80 billion to US$18.20 billion, missing analysts' estimates of US$18.90 billion.