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Sunday, 26 July 2015 12:13

Analysis finds Community Health Systems fairly valued Metro Health in JV proposal

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The value placed on Metro Health’s assets that would go to a proposed joint venture with Community Health Systems Inc. appears to be in line with the fair market value of the organization, according to an outside analysis.

Valuation firm AlixPartners estimated that Metro Health’s assets had a fair market value of $223.5 million to $254.8 million. The high end of the estimate is just below the $260 million valuation agreed upon by Metro Health and the Franklin, Tenn.-based Community Health Systems (NYSE: CYH).

“As such, the consideration being offered for 100-percent of Metro Health is greater than our concluded valuation range,” states the report from AlixPartners that was recently posted on a public website set up by the Michigan attorney general’s office, which is reviewing the proposed transaction.

The conclusion of AlixPartners, which was hired by the attorney general to conduct an independent valuation as part of its review, could remove one potential hurdle for the deal, leaving the key question of what happens to the net proceeds from the sale of Metro Health’s assets to the proposed joint venture.

A final report on the attorney general’s review of is now due out publicly early next month. The state review team examining the deal initially hoped to issue a final report by July 1.

Under state law, the attorney general conducts a routine review of a transaction whenever a for-profit entity like Community Health Systems acquires the assets of a nonprofit organization such as Metro Health. The review seeks to ensure that the buyer is paying fair market value, that the charitable assets of the seller are protected, and that net proceeds from the deal go to a charitable use.

Documents previously submitted to the attorney general’s office and posted online indicate $45.1 million in net proceeds would go to the Metro Health Foundation – $34.4 million from the sale after net debt and liabilities, plus $10.7 million in existing foundation assets.

A post-sale organizational chart submitted to the attorney general’s office shows the Metro Health Foundation continuing on as part of Metro Health. It would be overseen by an 11-member board: Metro Health and the foundation would each appoint five members, and one representative would be appointed by the attorney general’s office.

At a public forum hosted in April by the attorney general’s office, some speakers suggested that the net proceeds from the sale should go to the Grand Rapids Community Foundation to support health care-related grants.

Grand Rapids Community Foundation President Diana Sieger was among the voices that night advocating such as move and she told MiBiz last week that she’s hopeful the attorney general’s office will support it.

“It would be great if they made a decision to come to the Community Foundation because we would represent it well,” Sieger said. “We would serve it well and we have experience with health funding. There’s just all sorts of opportunity to remember people from whom the money was raised by Metro Health.”

Metro Health and Community Health Systems, the largest owner and operator of hospitals in the U.S., first began talking nearly two years ago and signed an agreement in January to create the joint venture.

Metro Health wants to sell all of its assets to a proposed joint venture with Community Health Systems, which would own an 80-percent stake it. Metro Health would own the remaining 20 percent.

Neither side has been willing to talk publicly about the deal since announcing the agreement.

Read 2453 times Last modified on Wednesday, 29 July 2015 10:16

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