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Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of hospital operator Tenet Healthcare (NYSE: THC ) soared a staggering 55% in intraday trading Friday on news that larger rival Community Health Systems (NYSE: CYH ) offered to buy it for $3.3 billion in November.
So what: The deal, which would create the nation's largest hospital operator if accepted, represents a whopping 40% premium to Tenet's closing price Thursday. Of course, with Tenet having rejected the unsolicited bid as "not remotely fair value," Mr. Market feels confident enough in a substantially higher offer to send the shares well past the offer price.
Now what: When you make 50% in one morning, taking at least some dough off the table seems like the prudent thing to do. While it might be tempting to hold out for a higher offer, the risk (even if it's small) that Community Health might back off altogether might not be worth taking. With Tenet peers like LifePoint Hospitals (Nasdaq: LPNT ) and Health Management (NYSE: HMA ) both trading at reasonable price multiples, there might be cheaper places to place your bet.
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