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The Associated Press June 1, 2010, 3:26PM ET

Tenet shares fall as company explores acquisition

Shares of Tenet Healthcare Corp. sank Tuesday, as the hospital operator confirmed it has started talks about acquiring an Australian hospital company.

Tenet, which is based in Dallas, said talks about a purchase of Healthscope, the second-largest private hospital corporation in Australia, were preliminary. Healthscope operates 43 hospitals and runs a pathology business.

Tenet operates 49 acute care hospitals and 59 outpatient centers in 11 states, mostly in the southeast United States. It said it believes the acquisition would improve its payer mix and help both its current and long-term margins and growth rates.

Even so, Stifel Nicolaus analyst Robert Hawkins called the possible deal "puzzling."

"There appears to be little strategic benefit in owning an Asian hospital company," he said in a Tuesday research note.

But he also said the deal may be a strong enough catalyst to enable Tenet to recapitalize its balance sheet.

Healthscope said Monday it has received three acquisition proposals, including one it received May 20 from a private equity consortium. It did not identify any of the potential buyers but said they would receive chances to conduct due diligence.

Media reports have identified one of the offers as being from the U.S. private equity firm Kohlberg Kravis Roberts & Co.

Tenet shares fell 95 cents, or 16.6 percent, to $4.77 in Tuesday afternoon trading.

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