Activist investor seeks to oust HMA board

The activist investor pushing for a shake-up of Health Management Associates is attempting to install a new board of directors that's potentially more supportive of selling the company.

Not to be outdone by the news that two publicly traded hospital chains have agreed to a merger, hedge fund Glenview Capital Management has embarked on its own public relations campaign, reaching out to the news media and shareholders and setting up a website, Revitalize HMA.

New York City-based Glenview also filed a proxy statement today with the U.S. Securities and Exchange Commission to nominate a slate of eight directors to HMA's board—a complete overhaul of the company's leadership team. HMA's current board of nine, which includes outgoing President and CEO Gary Newsome, has been chaired by William Schoen since April 1986.

In its materials to shareholders, Glenview has tried to paint itself as a long-term investor that was forced to become activist because of the “situational dynamics” at HMA and an “insular and stale” board.

A slide presentation making the case for new directors cites a “lost decade” at the company, in which it underperformed its peers by 104%.

Glenview also pointed to other factors including two pending Justice Department investigations and an SEC investigation, as well as frequent management turnover. With Newsome's departure, HMA will install its fifth CEO in 13 years.

Yet Glenview, which did not include a representative from its own firm among its board nominees, said it's not necessarily pushing for a takeover.

“In our communications with the company, we have not asked HMA to definitively sell themselves to the highest bidder, nor have we recommended that they ignore such possibilities,” the hedge fund said in a open letter to shareholders (PDF).

Yet it pointed out that HMA's board refused to engage in discussions with private-equity firms that were interested in buying the company six years ago.

With HMA's current board seen as “unwelcoming of and unfriendly towards” a deal, “a highly qualified reconstituted board ensures that any sale process be professional and cooperative and therefore likely to surface maximum value should such value be attainable through strategic combination.”

In response to the filing, HMA issued a brief statement. “HMA's board of directors recently engaged Morgan Stanley to assist with its ongoing consideration of strategic alternatives and opportunities available to HMA,” it said. “HMA's board of directors is reviewing Glenview's filings and will respond in due course.”

Glenview's proposal still needs to receive clearance from the SEC, a process that could take up to 20 days. Once that occurs, shareholders will have up to 60 days to cast their votes for the board nominees.

A new board would take office once the nominees receive approval from 50.1% of the outstanding shares. Shareholders can elect the entire slate of directors or any number of nominees individually.

Glenview, which currently owns 14.6% of the Naples, Fla.-based chain, signaled its intention to take a more active role in shaking up the company in early May. Later that month, it also filed for antitrust approval to acquire up to $2.2 billion in shares.

HMA has attempted to ward off any takeover by adopting a “poison pill” that would go into effect if any one shareholder tried to acquire more than 15% of the company. At the same time, it assembled a team of advisers and said it was in the midst of reviewing “strategic alternatives.”

Follow Beth Kutscher on Twitter: @MHbkutscher