In his presentation and during the question-and-answer period with analysts, Smith described the financial arrangements of the merger and made the case for the HMA deal. Here are the highlights:
Why merge? Smith described the merger with HMA as a "revenue opportunity" in terms of working with physicians and building networks to enhance revenue. "This is opportunistic. This industry is having a very difficult time, if you haven't noticed, in terms of all of our earnings. This is an opportunity for us to scale, get synergies, [and] improve our geographic presence."
Purchase price. It is a $7.6 billion deal, which includes an estimated $3.9 billion in cash and stock for HMA's equity and the assumption of $3.7 billion in HMA's outstanding debt. Smith said both CHS and HMA are happy with the cash-stock combination. "We thought that was a good way because we couldn't get the value any higher than we thought it currently is. We thought it would be a good way for people to participate in the future."
Markets. Smith described the "complimentary geographic fit." CHS and HMA will serve 29 states with an overlap in 15. Although both systems have a rural flavor, their hospitals are "largely in different markets" which means the CHS brand will expand to new communities.