UMC parent HMA will be sold
In addition to the cash and stock consideration, HMA shareholders would also receive one Contingent Value Right, or CVR, for one HMA share they own, which could yield additional cash consideration of up to $1 per share, depending on the resolution of certain legal matters.HMA, and many other hospital chains, has experienced a decline in the number of patients. According to published reports, HMA fared the worst and a story on CBS 60 Minutes noted a federal investigation into the companys billing and admission procedures.The 60 Minutes report said HMA was under investigation by the U.S. Department of Justice and the Securities and Exchange Commission. The company denied any wrongdoing and is cooperating with the investigation. The merger agreement was unanimously approved by CHS Board of Directors. HMAs Board of Directors also unanimously approved the agreement and recommended the companys shareholders approve the merger as well.Upon final approval, CHS would own or operate approximately 206 hospitals in 29 states with a total bed count of more than 31,000.This compelling transaction provides a strategic opportunity to form a larger company with a diverse portfolio of hospitals that is well positioned to realize the benefits of health care reform and to address the changing dynamics of our industry, said Wayne T. Smith, chairman, president and CEO of CHS.
Our complementary markets and the ability to form networks in key states, along with the synergies that will be available to us, can create value for the shareholders of our companies, the communities we serve, our employees and medical staffs. We look forward to working with the physicians and employees of HMA to advance the commitment shared across both organizations to pursue clinical excellence and to deliver quality care for patients.
William J. Schoen, chairman of the Board of HMA, said, This agreement represents the successful conclusion of the strategic review process that our Board of Directors commenced at the end of last year, during which we evaluated several alternatives, including remaining independent and potential transactions with other strategic parties. Our agreement with CHS provides substantial value to our shareholders.
Shareholders will receive immediate value in cash, as well as CHS stock that will allow them to participate in the future growth of a true industry leader. We are pleased that this combination will create an even stronger organization for the benefit of our patients, physicians, associates and the communities we serve, Schoen added.
The transaction is expected to close by the end of March 2014 and is subject to approval by a 70 percent vote of HMAs stockholders, antitrust clearance, receipt of other regulatory approvals, the absence of certain adverse developments, and customary closing conditions. The transaction is not subject to a financing condition. CHS has received financing commitments from BofA Merrill Lynch, Credit Suisse, and certain of their affiliates.
BofA Merrill Lynch and Credit Suisse are acting as financial advisors to CHS, and Kirkland & Ellis LLP is acting as its legal advisor.
Morgan Stanley & Co. LLC is acting as financial advisor to HMA, and Weil, Gotshal & Manges LLP is acting as its legal advisor.
The sale of HMA, a Naples, Fla.,-based company, had been rumored for a few months and picked up steam in June after employees at Lebanons UMC were informed they would not be allowed to accrue additional vacation days through October, they would not receive their step raises through the rest of the year and that there would be no corporate matches to their 401-K retirement plans by the parent company.
Those actions led to speculation that HMA might be up for sale, and was further fueled by comments in financial areas that CHS was interested in a possible purchase.
HMAs former chief executive officer announced his retirement, effective in June. A new interim CEO, John Starcher, was named by HMA on Tuesday.
The Wilson Post, in an article in the June 12 edition, reported the actions taken by HMA with regards to employees vacation time, step raises and retirement plans were the result of federal budget cuts, known as sequestration. Company officials called on Congress to repair the damage they have done by passing a responsible budget.
HMA officials, in a statement, said that due to sequestration, hospitals throughout the country, including ours, are seeing reduced payment for services while the cost of care continues to increase.