Health Management Associates, the parent company of Sparks Health System in Fort Smith and Summit Medical Center in Van Buren, is being acquired by Community Health Systems, according to a statement issued early Tuesday (July 30).
Franklin, Tenn.-based 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.
Initial reports place the buyout value at $7.6 billion, with almost $4 billion from cash and stock. CHS will also assume about $3.7 in debt held by HMA.
The deal is expected to close in the first quarter of 2014, and requires approval from 70% of HMA stockholders. The deal also includes federal antitrust clearance and other regulatory approvals. However, Community Health has already received financing agreements from Bank of America Merrill Lynch and Credit Suisse.
When the deal is complete, CHS will own or operate 206 hospitals in 29 states and have more than 31,000 licensed beds. CHS now owns or operates 135 hospitals in 29 states with about 20,000 licensed beds. Through its QHR subsidiary, the company also manages about 150 independent community hospitals in the U.S.
HMA owns or operates 71 hospitals in 15 states with 11,000 licensed beds.
It remains uncertain what the CHS-HMA deal means 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 is now the Phoenix Expo Center 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.
"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," Wayne Smith, Chairman, president and CEO of Community Health Systems, said in the statement. "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 Schoen, chairman of the HMA Board of Directors, said the board evaluated several alternatives before agreeing to the sale to CHS.
“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 noted in the statement.
Prior to the deal with CHS, HMA was involved in a proxy fight with New York City-based Glenview Capital Management. 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.”
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.”
The City Wire will have more on this story later today.