Sparks, Summit parent loses proxy vote (Updated)

Glenview Capital Management has succeeded in its effort to replace the Board of Directors at Health Management Associates – the parent company of Sparks Health System in Fort Smith and Summit Medical Center in Van Buren.

Monday’s (Aug. 12) news ends several months of a bitter proxy fight between New York City-based Glenview and HMA. Glenview, which owns 14.6% of HMA shares, had initiated a “consent” vote to remove the existing board of directors at HMA. Officials with Glenview alleged that HMA board and management actions in running the company were “substandard.”

On June 25 Glenview formally requested that HMA shareholders vote for a complete overhaul of the HMA board of directors. Officials with Glenview say the problems at HMA are so deep that they believe all new Board members are required who have the experience to make changes.

HMA officials refuted the allegations, but in late June noted that the company “recently engaged Morgan Stanley to assist with its ongoing consideration of strategic alternatives and opportunities available to HMA.” Also, in recent days HMA offered Glenview and olive branch of accepting one Glenview nominee to the board. An indication that the Glenview push may succeed when closely watched Institutional Shareholders Services recommended that HMA shareholders vote for the Glenview slate of board nominees.

Glenview has, apparently, won the shareholder battle to “Revitalize HMA.” Glenview issued the following statement.

“Earlier today, Glenview submitted to the appropriate representatives of HMA documentation that a majority of shareholders have voted for the removal and replacement of the entire Board of Directors at HMA. We anticipate that the Sitting HMA Board will work with their outside advisors to ensure a prompt fiduciary review of the voting results. Led by future HMA Chairman Steven Shulman, the nominees will be in contact with the outgoing HMA Board and their advisors to ensure a smooth transition to be effected this week.”

UPDATED INFO: HMA issued this statement late Monday: “An independent inspector of election will promptly review and certify the validity of the written consents delivered to the Company. The HMA board is committed to ensuring an orderly transition if the written consents delivered by Glenview are validated by the independent inspector of election. The Company will provide further information when the review of the independent inspector of election is complete.”

The news from Glenview raises questions about the July 30 announcement that Community Health Systems plans to acquire Naples, Fla.-based HMA in a deal valued at $7.6 billion that could close in the first quarter of 2014.

Community Health officials said in this Reuters report that the board shift is not changing their plans.

"Our definitive agreement to acquire HMA remains unchanged. We look forward to working constructively with the new board of directors at HMA to complete this strategic transaction," Community Health spokeswoman Tomi Galin said in an emailed statement to Reuters.

Community Health Systems is almost double the size of HMA, and its hospital portfolio includes eight facilities in Arkansas. Those include four in Northwest Arkansas – Northwest Medical Center-Bentonville, Northwest Medical Center-Springdale, Siloam Springs Regional Hospital and Willow Creek Women’s Hospital.

However, Glenview has said the $13.78 per share offering for HMA is too low, and said the offer from Franklin, Tenn.-based Community Health will get a second look.

“Several months from now, with greater Board and Management engagement and greater transparency, Glenview and other shareholders will consider the Community Proposal with an eye towards maximizing shareholder value and positioning HMA to best serve the healthcare needs of its local communities,” noted the Glenview filing.

Glenview has investments of approximately $2 billion with five hospital chains, and manages more than $6 billion in all of its investment funds.

Glenview’s apparent success in replacing the HMA board delivers even more uncertainty for the 500-job regional service center HMA has planned for Fort Smith. HMA officials announced on April 4 that the center would be housed in what was once a portion of Phoenix Village Mall. HMA estimated the annual payroll will be $21.5 million, with the center at full employment within 12 months. The facility is scheduled to begin operations in early September.

Shares of HMA (NYSE: HMA) closed Monday at $13.24, unchanged from the previous close. During the past 52 weeks the share price has ranged from a $17.28 high to a $6.53 low.