Gary Lieberman at Wells Fargo Securities is in the camp that thinks Glenview Capital's takeover of the Health Management Associates board of directors may end up adding to Community Health Systems' takeover tab by early next year. Lieberman doesn't think the $7.6 billion deal will get called off, but Glenview will not look at Franklin-based CHS as a white knight as the former board did — even though it owns more than 9 percent of CHS.
Still, there are two things to think about from CHS' end: First, it would be easy to hold firm on the price because HMA's Q2 numbers and outlook were not good. Second, the extra money question could be resolved by a decent rise in CHS shares. The acquisition of HMA includes a $3.28 stock component that is now worth less than $3. But if CHS stock (Ticker: CYH) manages to climb back to its June highs thanks to a better Q3, its offer for HMA might be sweetened just enough to appease Glenview.
Hedge fund manager Larry Robbins has secured enough shareholder backing to oust the entire board at Health Management Associates, which two weeks ago said it would sell itself to Franklin-based Community Health Systems in a $7.6 billion deal. The boss of Glenview Capital has been agitating for big changes at HMA but also owns about 9 percent of CHS. But he has said that he sees CHS' bid as only a starting point and has said that he also thinks the local company's shares (Ticker: CYH) should be trading higher. (They're up more than 40 percent this year but have been flat over the past five months.)
Robbins and his crew had this to say about today's board changes:
We at Glenview are proud of our efforts to improve quality, compliance, accountability and shareholder value at HMA, and we are happy to have contributed to the broader discourse by challenging all shareholders to think and act like owners to promote financial and corporate success. 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.
For its part, CHS issued this brief comment when we got in touch: "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."
Influential proxy advisory firm ISS is calling on shareholders of Health Management Associates — which has agreed to sell to Community Health Systems — to remove the company's board in favor of the slate being proposed by activist hedge fund Glenview Capital. In a statement, HMA said it strongly disagrees with ISS and calls for continuity in handling the sale to CHS and the ongoing government investigations into some of its business practices.
Community Health Systems senior executive Tom Miller booked one of the bigger stock option paydays we've seen this year last Friday when he exercised 80,000 stock options and then sold the resulting shares as well as some 30,000 others. His net on the transactions came to $2.5 million. Miller, who has been with CHS since 2007, is one of the company's five division presidents operating just below Chairman, President and CEO Wayne Smith and CFO Larry Cash.
Mizuho Securities analyst Ann Hynes has lifted her price target on shares of Community Health Systems to $48 from $45 but kept her 'neutral' rating on the company. CHS (Ticker: CYH) ended Tuesday trading at $45.07.
William Crow at Raymond James didn't like the look of Ryman Hospitality Properties' Q2 results Tuesday. He downgraded the stock (Ticker: RHP) to 'market perform' from 'outperform.' His target for Ryman now is $48, which is still well above the stock's current level of $35 and change.
There are few such worries for Tractor Supply investors. A handful of analysts have recently hiked their price targets. Joining them Tuesday was John Staszak of Argus Research, who now sees shares of the Brentwood-based farm and ranch retailer (Ticker: TSCO) to $140 from $128.
Glenview Capital Management, the hedge fund that owns almost 15 percent of Health Management Associates, continues to push investors in the hospital company to replace the sitting board with its own slate of directors. In their latest investor presentation, Glenview officials say they also could influence just how much Community Health Systems will end up paying for its Florida-based rival. A key part in that is working with regulators to address the investigations into HMA's emergency room practices and physician relationships.
That little zinger comes from the Lex team at the Financial Times, who on Friday gave their two cents about Community Health System's planned acquisition of Health Management Associates. The main takeaway from the pending $7.6 billion deal, Lex writes, is that it may end up being a high-water mark for valuations of hospital companies, which have blasted up in the past year on the back of health care reform hopes.