$7.6 billion hospital deal gets approval

NAPLES — The newly installed board of directors at Health Management Associates backed a deal to sell the 71-hospital company to Tennessee-based Community Health Systems for $7.6 billion.

“After conducting an extensive review in conjunction with our legal and financial advisers, we are confident that this transaction provides maximum value to HMA stockholders and represents the best path forward for the company,” says Steve Shulman, chairman of HMA, in a statement. “In addition to having confidence in the value of the transaction, we also support the merger's strategic rationale and benefits for HMA's patients, physicians and associates across the communities we serve. HMA and Community Health Systems are stronger together.”

The deal, which had been negotiated with HMA's previous board before it was ousted by activist shareholders in August, is scheduled to be completed in the first three months of next year. Under the terms of the deal, Community Health will pay HMA shareholders $10.50 in cash and the rest in Community Health stock. HMA shareholders will own about 16% of the shares of the combined company when the deal is completed.

“We are excited to combine these two organizations to create a hospital company with more than 200 facilities and leverage our relative strengths and combined scale to better serve our patients, physicians and communities. We are pleased to have the full support of HMA's new board of directors as we move forward to complete this transaction in the first quarter of 2014,” says Wayne Smith, chairman, president and CEO of Community Health, in a statement.

Separately, HMA reported lower earnings and revenues in the third quarter. The company posted a net loss of $96.6 million on revenues of $1.42 billion in the third quarter. That compares with net income of $40.9 million on revenues of $1.44 billion in the third quarter of 2012. HMA says the company incurred nearly $103 million in expenses related to change of control, severance and merger-related costs in the third quarter, including $85.1 million in compensation expense as all stock awards became vested.