Tenet Healthcare Joins the Healthscope Auction

CHICAGO (Reuters) – U.S. hospital operator Tenet Healthcare Corp (THC.N) said on Tuesday it is in talks to buy Healthscope Ltd (HSP.AX), Australia’s second-largest chain of private hospitals.

It did not discuss a price. Healthscope owns 43 hospitals, representing 15 percent of Australia’s private hospital market, and is the country’s third-largest pathology business.

While the talks are in preliminary stages, Tenet said it is deviating from its policy of not commenting on possible acquisitions because of the recent volatility in its common stock.

Shares of Tenet fell 85 cents, or almost 15 percent, to $4.87 in afternoon trading on the New York Stock Exchange.

Tenet said it believes the potential acquisition of Healthscope would improve its margins and growth rates.

Tenet said it is confident in its own ability to grow earnings and cash flow in its domestic operations and characterized its 2010 outlook for EBITDA and cash flow as conservative.

The company last month reiterated its forecast for full-year adjusted earnings before interest, taxes, depreciation and amortization of $298 million.

Its U.S. business is performing well, Tenet said, with paying and commercial in-patient volume trends through May 31 favorable relative to the first quarter, and May results improving over April and March.

Tenet said it would provide additional details about its 2010 outlook on June 15 at an investor conference. (Reporting by Susan Kelly; editing by Leslie Gevirtz and Gerald E. McCormick)