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Community Health (CYH) Continues to Divest, Aligns Business
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Community Health Systems, Inc. (CYH - Free Report) has signed a definitive agreement to sell five Pennsylvania hospitals and their associated assets to the subsidiaries of Reading Health System. Hospitals included in the transaction are the 169-bed Brandywine Hospital in Coatesville, the 148-bed Chestnut Hill Hospital in Philadelphia, the 63-bed Jennersville Hospital in West Grove, the 151-bed Phoenixville Hospital in Phoenixville and the 232-bed Pottstown Memorial Medical Center in Pottstown.
The company is burdened with long-term debt and has therefore implemented portfolio rationalization and a deleveraging strategy by divesting hospitals and non-hospital businesses. Generally, these business lines are not in one of the company’s strategically beneficial service areas, are less complementary to its business strategy and have lower operating margin.
Significant divestitures and a consequent decrease in debt level, have helped the company to gain investors’ faith as evident by its stock price improvement of 64% year to date compared with the gain of 11.2% for the Zacks categorized Medical-Hospital industry. The stock has performed better than other players in the same field which includes HCA Holdings, Inc. (HCA - Free Report) , LifePoint Health Inc. and Universal Health Services Inc.’s (UHS - Free Report) gain of 10.8%, 9.42% and 8.23%, respectively, during the same time frame.
The company has been aligning its business. It spun 38 Quorum hospitals last year and reduced its divisional structure from six to five divisions. With a number of announced hospital divestitures slated to close over the coming months, the company will reduce its number of divisions to four. This change will help to improve the overall efficiency of the company’s operations. Recently, the company closed transactions for 11 hospitals accounting for approximately $1.1 billion of annual revenue, and low single-digit EBITDA margin. Gross proceeds from these divestitures, including working capital, were $425 million.
On Apr 28, the company closed the 125 bed, Stringfellow Memorial Hospital transaction with The Health Care Authority of the City of Anniston, AL. On May 1, the company closed the eight-hospital divestiture transaction with Steward Health System. On the same day, it also closed the transaction of two of the three hospitals it expected to sell to Curae Health.
The company now expects the Clarksdale, MS hospital divestiture to close in the second quarter of 2017. In addition to the 11 hospitals that closed sale on May 2, the company has 12 hospitals under definitive divestiture agreement. These account for approximately $1.5 billion of the annual revenue and mid-single-digit EBITDA margin. Estimated gross proceeds from these divestitures including working capital are projected at around $915 million. In March, the company entered into an agreement to sell four hospitals in the state of Pennsylvania to Pinnacle. This transaction is expected to close in the summer of 2017.
On May 1, the company announced a definitive agreement to sell two hospitals in the state of Texas to HCA. It also announced a definitive agreement to sell Lake Area Medical Center in Lake Charles, LA, to CHRISTUS Health. Both these transactions are expected to close later in thethe second quarter.
Adding up, the company’s total hospital divestiture plan encompasses 10 hospital transactions that include 30 hospitals of which 11 have recently closed. These divestitures account for approximately $3.4 billion of annual revenue and mid-single digit EBITDA margins. Estimated gross proceeds from these divestitures including working capital are projected at $2 billion. The company expects the transactions for these hospitals to close during the first nine months of 2017.
The divestiture plan includes approximately $3.4 billion of annual revenue and projected proceeds, including working capital of approximately $2 billion. This is up from last quarter, when the plan included approximately $2.8 billion annual revenue and projected proceeds of approximately $1.5 billion. Proceeds from these transactions will be used for additional debt pay down.
Along with improving its debt-EBITDA ratio, the company is working to reduce its overall debt. Its current divestiture plan will also allow the company to move to a portfolio of hospitals that are better positioned to drive volume growth, EBITDA margin and cash flow. This will also allow the company to direct future investments in most attractive markets and regional networks, which provide a higher return on capital.
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Community Health (CYH) Continues to Divest, Aligns Business
Community Health Systems, Inc. (CYH - Free Report) has signed a definitive agreement to sell five Pennsylvania hospitals and their associated assets to the subsidiaries of Reading Health System. Hospitals included in the transaction are the 169-bed Brandywine Hospital in Coatesville, the 148-bed Chestnut Hill Hospital in Philadelphia, the 63-bed Jennersville Hospital in West Grove, the 151-bed Phoenixville Hospital in Phoenixville and the 232-bed Pottstown Memorial Medical Center in Pottstown.
The company is burdened with long-term debt and has therefore implemented portfolio rationalization and a deleveraging strategy by divesting hospitals and non-hospital businesses. Generally, these business lines are not in one of the company’s strategically beneficial service areas, are less complementary to its business strategy and have lower operating margin.
Significant divestitures and a consequent decrease in debt level, have helped the company to gain investors’ faith as evident by its stock price improvement of 64% year to date compared with the gain of 11.2% for the Zacks categorized Medical-Hospital industry. The stock has performed better than other players in the same field which includes HCA Holdings, Inc. (HCA - Free Report) , LifePoint Health Inc. and Universal Health Services Inc.’s (UHS - Free Report) gain of 10.8%, 9.42% and 8.23%, respectively, during the same time frame.
The company has been aligning its business. It spun 38 Quorum hospitals last year and reduced its divisional structure from six to five divisions. With a number of announced hospital divestitures slated to close over the coming months, the company will reduce its number of divisions to four. This change will help to improve the overall efficiency of the company’s operations. Recently, the company closed transactions for 11 hospitals accounting for approximately $1.1 billion of annual revenue, and low single-digit EBITDA margin. Gross proceeds from these divestitures, including working capital, were $425 million.
On Apr 28, the company closed the 125 bed, Stringfellow Memorial Hospital transaction with The Health Care Authority of the City of Anniston, AL. On May 1, the company closed the eight-hospital divestiture transaction with Steward Health System. On the same day, it also closed the transaction of two of the three hospitals it expected to sell to Curae Health.
The company now expects the Clarksdale, MS hospital divestiture to close in the second quarter of 2017. In addition to the 11 hospitals that closed sale on May 2, the company has 12 hospitals under definitive divestiture agreement. These account for approximately $1.5 billion of the annual revenue and mid-single-digit EBITDA margin. Estimated gross proceeds from these divestitures including working capital are projected at around $915 million.
In March, the company entered into an agreement to sell four hospitals in the state of Pennsylvania to Pinnacle. This transaction is expected to close in the summer of 2017.
On May 1, the company announced a definitive agreement to sell two hospitals in the state of Texas to HCA. It also announced a definitive agreement to sell Lake Area Medical Center in Lake Charles, LA, to CHRISTUS Health. Both these transactions are expected to close later in thethe second quarter.
Adding up, the company’s total hospital divestiture plan encompasses 10 hospital transactions that include 30 hospitals of which 11 have recently closed. These divestitures account for approximately $3.4 billion of annual revenue and mid-single digit EBITDA margins. Estimated gross proceeds from these divestitures including working capital are projected at $2 billion. The company expects the transactions for these hospitals to close during the first nine months of 2017.
The divestiture plan includes approximately $3.4 billion of annual revenue and projected proceeds, including working capital of approximately $2 billion. This is up from last quarter, when the plan included approximately $2.8 billion annual revenue and projected proceeds of approximately $1.5 billion.
Proceeds from these transactions will be used for additional debt pay down.
Along with improving its debt-EBITDA ratio, the company is working to reduce its overall debt. Its current divestiture plan will also allow the company to move to a portfolio of hospitals that are better positioned to drive volume growth, EBITDA margin and cash flow. This will also allow the company to direct future investments in most attractive markets and regional networks, which provide a higher return on capital.
Community Health carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank stocks here.
More Stock News: 8 Companies Verge on Apple-Like Run
Did you miss Apple's 9X stock explosion after they launched their iPhone in 2007? Now 2017 looks to be a pivotal year to get in on another emerging technology expected to rock the market. Demand could soar from almost nothing to $42 billion by 2025. Reports suggest it could save 10 million lives per decade which could in turn save $200 billion in U.S. healthcare costs.
A bonus Zacks Special Report names this breakthrough and the 8 best stocks to exploit it. Like Apple in 2007, these companies are already strong and coiling for potential mega-gains. Click to see them right now >>