Community Health Systems agreed on Tuesday to buy Health Management Associates for about $3.6 billion in cash and stock, in a long-expected union of two for-profit hospital systems.
Under the terms of the deal, Community Health will pay $10.50 a share in cash and 0.06942 of a share for each share of H.M.A. That values the takeover bid at about $13.78 a share, based on Monday’s closing stock prices.
Including the assumption of debt, the merger is valued at about $7.6 billion.
H.M.A. shareholders will also receive what’s known as a contingent value right, which could be worth up to $1 a share if the company manages to resolve certain legal fights that it faces.
Regulators have been investigating the hospital operator’s patient admission practices. (Community Health recently disclosed a subpoena from the Justice Department over a similar matter.)
If approved, the deal will create a big for-profit hospital system with 206 hospitals in 29 states, many of which are in rural areas. It is the latest by Community Health, which has struck 25 deals over the last six years, the biggest of which was the $5 billion takeover of Triad Hospitals in March of 2007.
The sale will give H.M.A. a way to solve two of its most pressing problems. One is the impending retirement of its chief executive, Gary D. Newsome, who is planning to join a religious mission in South America.
The other is a battle with Glenview Capital Management, a big shareholder seeking to replace the company’s board. The hedge fund has argued that H.M.A. has drastically underperformed its rivals, having achieved less than a 1 percent return for shareholders over the past 10 years.
Though the purchase price may not convince shareholders â€" it is below H.M.A.’s Monday closing stock price of $13.92 â€" the company said in a statement that it was higher than the share price before the hospital operator disclosed that it was exploring strategic options.
The deal is expected to close by March 30 of next year, pending approval by 70 percent of H.M.A.’s shareholders and by regulators.
Community Health has lined up loans from its financial advisers, Bank of America Merrill Lynch. Kirkland & Ellis provided legal counsel.
H.M.A. received advice from Morgan Stanley and the law firm Weil, Gotshal & Manges.
