* Board changeover complicates planned sale to Community
* Community Health says its agreement to acquire HMA is
By Susan Kelly
Aug 12 Activist investor Glenview Capital
Management said on Monday a majority of shareholders in Health
Management Associates Inc have voted to oust the U.S.
hospital chain's board and replace it with Glenview's slate of
directors, throwing a wrench into HMA's plans to be acquired by
Community Health Systems Inc.
Glenview, the hedge fund which owns 14.6 percent of HMA,
said it expects the transition to occur this week, after the
current board reviews the voting results with its outside
Community Health and Health Management last month announced
they had agreed to a $3.9 billion merger, with the larger
hospital group offering $13.78 a share in cash and stock for
But Glenview quickly signaled it was not ready to sign off
on the deal, saying the price should serve as a floor value for
HMA and that it would press forward with its goal of replacing
HMA's board with the aim of improving the company's performance.
Community Health said on Monday it remained committed to
"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,"
Community Health spokeswoman Tomi Galin said in an emailed
HMA did not immediately respond to requests for comment.
Glenview said it would consider Community's proposal in
several months, once the new board, led by Steven Shulman as
chairman, is in place.
Glenview had argued that HMA's weak financial results and
legal issues made it hard to determine the company's full value.
"STUNNING AND SERIOUS EVENT"
CRT Capital Group analyst Sheryl Skolnick called the ouster
of HMA's board a "stunning and serious event, one that happens
rarely among publicly traded companies." She also cautioned that
the current board, led by William Schoen, may not give up its
seats without a fight. Schoen has served as HMA chairman since
HMA on Friday announced second-quarter results that were
below the forecast it gave in July due to higher legal and
employee severance expenses. Its chief executive, Gary Newsome,
retired at the end of July, and the company named John Starcher
as interim president and chief executive.
HMA in July also disclosed that it had received additional
subpoenas in probes by the U.S. Department of Health and Human
Services into its emergency room operations and by the Office of
the Inspector General into its physician relationships.
HMA also is being investigated by the U.S. Securities and
Exchange Commission over accounting practices. In December, it
was the subject of a story on the "60 Minutes" CBS television
program that claimed it used aggressive policies to boost
admissions. Health Management denied the
Shares of HMA closed unchanged at $13.24 on Monday.