HMA Shareholders Approve CYH Merger - Analyst Blog

Shareholders of Health Management Associates Inc. (HMA) have voted in favor of its merger with Community Health Systems, Inc. (CYH). Franklin, Tenn.-based Community Health Systems offered to acquire Naples, Fla.-based Health Management Associates in June last year.

Following the announcement, shares of both Health Management Associates and Community Health Systems slipped 0.8% and 2.6%, respectively.

CYH will take over HMA for $13.78 per share. The deal is valued at roughly $7.6 billion (including the latter's debt of $3.7 billion) in cash and stock.

Health Management stockholders will own about 16% of the shares of the combined entity following the completion of the transaction. The acquisition is expected to complete by the end of the month.

On Nov 13, HMA reported adjusted loss of 1 cent in the third quarter of 2013, registering a drastic fall from earnings of 22 cents in the year-ago quarter. Earnings also significantly lagged the Zacks Consensus Estimate by 17 cents.

Net revenues slipped 1.2% to $1,421.2 million, slightly missing the Zacks Consensus Estimate of $1,455 million. Same hospital net revenues were $1.4 billion while same hospital net revenues per adjusted admission dipped 3.1% in the quarter.

Based on the weak third-quarter results, pressure on the top line and ongoing weakness in admissions, HMA lowered its outlook for 2013. Net revenues (before the provision for doubtful accounts) are expected to range between $6.84 and $6.86 billion. The Zacks Consensus Estimate of $5.86 billion lies below the low-end of the guided range.

Earlier, in July 2013, net revenues (before bad debt expense) were envisaged in the band of $6.80−$7.00 billion, which included the positive impact from the company's stake in Bayfront Health System.

Health Management forecasts EPS from continuing operations in the range of 48−50 cents for the year, down from the prior guidance of 59−70 cents (excluding interest rate swap expense of $75−$85 million). The Zacks Consensus Estimate for 2013 earnings stands at 48 cents. Current guidance includes an impact of $60−$65 million of expected HCIT payments in the fourth quarter and $10−$15 million of anticipated negative impact associated with the Blue Cross/Blue Shield relations in Mississippi during the same period.

Some better-ranked stocks that are performing well include VCA Antech Inc. (WOOF) with a Zacks Rank #2 (Buy) in the med-hospitals industry and Envision Healthcare Holdings, Inc. (EVHC) with a Zacks Rank #1 (Strong Buy) in the medical services industry.