HMA begins review of deal with Community Health

The newly seated Board of Directors at Health Management Associates said Wednesday (Sept. 25) that it will seek a second opinion on a previously announced plan to sell the hospital company to Community Health Systems.

Naples, Fla.-based HMA is the parent company of Sparks Health System in Fort Smith and Summit Medical Center in Van Buren.

On July 30, HMA and Franklin, Tenn.-based Community Health announced that Community would acquire HMA in a deal valued at $7.6 billion. The deal, if it goes through, would likely close in the first quarter of 2014.

However, that deal was approved by an HMA Board that was ousted in a proxy fight pushed by New York City-based Glenview Management.

On June 25 Glenview formally requested that HMA shareholders vote for a complete overhaul of the HMA board of directors. Officials with Glenview said financial and structural problems at HMA were so deep that they believe a new Board was required to provide the experience to make changes. It was announced Aug. 12 that the board nominees submitted by Glenview, which owns 14.6% of HMA shares, had received more than 50% of shareholder support.

When the new board was named on Aug. 16, the new leadership promised a second look at the deal to sell to Community Health. That review has begun.

“In connection with its review, the Board has retained independent financial advisors, Lazard Frères & Co. LLC and UBS Securities LLC, legal counsel, Paul, Weiss, Rifkind, Wharton & Garrison LLP and financial operating and compliance consultant Alvarez & Marsal Healthcare Industry Group, LLC,” noted an HMA statement.

The associated filing with the U.S. Securities and Exchange Commission notes that the “Additional Financial Advisors is requested by the HMA board of directors to render an opinion as to the fairness, from a financial point of view, of the merger consideration to be received by the holders of HMA common stock …”

If the decision is that it is not fair, HMA will terminate the agreement under a “company adverse recommendation change.” Such a change could lead to a hostile takeover attempt by Community Health or HMA would pay Community Health a $109 million termination fee.

The opinion from the advisors selected by HMA is to be issued no later than Nov. 19.

Glenview has said the $13.78 per share offer is too low.

Community Health agreed to the review, and both companies are moving forward with the formal process of preparing a proxy statement and prospectus related to the transaction for HMA shareholders to approve or reject.

HMA operates 71 hospitals in 15 states with approximately 11,000 licensed beds.

Shares of HMA (NYSE: HMA) closed Wednesday at $12.68, down 13 cents. During the past 52 weeks the share price has ranged from a $17.28 high to a $6.97 low.