HMA Chief to Step Down as Glenview Denies Takeover Bid

In the latest twist for Health Management Associates, the for-profit hospital operator's CEO, Gary D. Newsome, announces he will retire in July. Last week HMA moved to block a takeover bid by filing a shareholders' rights plan.

Just days after launching a shareholders' rights plan to protect Health Management Associates Inc. from a perceived takeover, CEO and President Gary D. Newsome announced Tuesday afternoon that he will retire in July to pursue missionary work in South America.

"I am proud of our accomplishments over the past five years as we've transformed Health Management into a vibrant, innovative company that is well-positioned and on a clear path to great success," Newsome said in prepared remarks.

Newsome has been named by The Church of Jesus Christ of Latter-day Saints to serve as the president of its Uruguay-Montevideo Mission in South America, the HMA release said.

"My family and my faith have always been the most important parts of my life and it is a rare privilege to serve in Uruguay, a place that has remained in my heart since I served my first mission there more than 35 years ago," Newsome said. "I am sincerely grateful for the support I've received from the Health Management Board of Directors, management team, and our associates and physicians."

Newsome's announcement is the latest twist in an eventful week for the Naples, FL-based for-profit hospital chain.

On Friday, just before the long Memorial Day weekend, HMA dropped a filing with the Securities and Exchange Commission stating that its board of directors adopted the shareholders' rights plan to thwart a perceived takeover bid by hedge fund manager Glenview Capital Management, LLC.

Glenview owns 14.56% interest in HMA common stock and in a 13D filing with the SEC on May 6 Glenview said that it "may engage in communications with relevant parties regarding the company and ways to enhance shareholder value, including, but not limited to, the Company's management, members of the board of directors, shareholders or other investors, potential strategic partners, financial advisers and other industry participants."

Pointing to the Glenview filing, HMA in its 8-K filing with the SEC said "the rights agreement is intended to protect the Company and its stockholders from efforts to obtain control of the Company that the Board of Directors determines are not in the best interests of the Company and its stockholders, and to enable all stockholders to realize the long-term value of their investment in the Company."

HMA said that affiliates of Glenview also had filed notice under the Hart-Scott-Rodino Antitrust Improvement Acts on May 22, which "indicates that these affiliates presently intend to acquire, collectively, up to approximately $2.2 billion of the Corporation's outstanding common stock."

HMA's filing, in turn, prompted Glenview on Tuesday to issue a "statement of clarification regarding its holdings" in HMA.

"We feel the 8-K issued by HMA in conjunction with the Board's decision to enact a shareholder rights plan, commonly referred to as a poison pill, may cause confusion regarding our intentions and may lead to undue volatility in the stock price…," the Glenview statement read.

Glenview said its filings with the SEC were intended to comply with provisions of Hart-Scott-Rodino "in order to be in a position to acquire even one additional share of HMA." Further, Glenview said "such an investment size is both beyond our present intention and beyond our present resources available for any single position. Such a filing was required to facilitate even a modest increase in our present holdings. In plain English, we have no present intention or future plan to buy either $2.2 billion of stock or 75% of HMA."

HMA spokeswoman MaryAnn Hodge said Tuesday that Glenview's clarification "will not change (HMA's) shareholders' rights plan. The Board continues to believe that adopting the rights plan at this time is prudent and in the best interest of the company and its stockholders."

Brian Tanquilut, a senior analyst for healthcare services at Jefferies & Company, Inc., says fears that Glenview is mounting a takeover are overblown:

"Glenview is a savvy healthcare investor. It's just a deep value picking strategy and I wouldn't read too much into that," Tanquilut says. "They made a decision to invest in HMA given that HMA is the cheapest hospital stock today. I don't think people thought Glenview was going to try to take over HMA. That's not their M.O. They are a hedge fund, not a private equity shop. They have never been an activist shareholder. People who know Glenview and what they are doing never ever thought it was a takeover strategy, but it was an opportunistic play. It just so happens that because of the size of their investment they had to file and HMA read into it 'Holy cow! They filed for up to $2.2 billion worth of stock and we are a $2.7 billion company.' But for HMA it's the right thing to do on their part, which is to protect their shareholder base."

HMA made no mention of the shareholders rights plan in its announcement of Newsome's retirement, which takes effect July 31.

HMA operates 71 general acute care hospitals in small- to mid-sized markets in 15 states with approximately 11,500 licensed beds, more than 42,000 employees and a medical staff of 10,000 physicians.