Monthly Archives: September 2013

HMA board hires financial advisers to review sale

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Hospital operator Health Management Associates Inc., parent company of Knoxville-based Tennova Healthcare, said Wednesday that its new board has hired independent financial advisers to evaluate the proposed sale of HMA.
Franklin, Tenn.-based Community Health Systems announced in July that it would buy HMA for $3.9 billion in stock and cash, plus assumption of debt.
The acquisition is expected to close by the end of the first quarter next year.
Hired to take a look at the offer are financial advisers, Lazard Frères & Co. LLC and UBS Securities LLC.
Naples, Fla,.-based HMA also said it has retained legal counsel, Paul, Weiss, Rifkind, Wharton & Garrison LLP and financial operating and compliance consultant Alvarez & Marsal Healthcare Industry Group LLC.
HMA also said in a news release that CHS “consented to the engagement” of the financial advisers.
Last month, HMA’s largest shareholder, Glenview Capital Management, spearheaded a shareholder vote to replace the HMA board with a slate of independent nominees tasked with getting a better price.
Glenview, a private investment management firm with more than $6 billion of assets under management, owns about 15 percent of HMA’s shares.
Brian Tanquilut, an analyst at Jefferies & Co. in Nashville, told Bloomberg News, investors should view the hiring of financial advisers to look at the deal should as good news.
“From an investor perspective, having a time line actually helps in evaluating the risk of where the stock will trade.”
Click here for the Bloomberg report.

UT economists predict modest economic growth in 2014

University of Tennessee economists predict modest improvement in the Tennessee and national economies in 2014, according to fall 2013 Tennessee Business and Economic Outlook released Thursday.
“While growth is subdued due to reduced federal government spending and a global slowdown, the expansion has shown a much-welcomed resilience,” said Matt Murray, associate director of UT’s Center for Business and Economic Research and the report’s author.
“The outlook for 2014 is encouraging, but the economy continues to confront a number of domestic and international challenges,” Murray added.
Residential and non residential fixed investments and exports will drive growth next year, while reduced federal and state government spending “will be the primary drags on growth,” Murray said.
Unemployment will continue to fall in 2014, but a decline in labor force participation continues to be a problem, the report says.
The state’s unemployment rate, however, will average 8.2 percent for 2013, compared to 7.6 percent for the nation. Tennessee’s unemployment rate was 8 percent last year and is expected to drop to 7.6 percent in 2014 and 7 percent in 2015, according to a news release.
Other highlights from the report:
Personal income in Tennessee is expected to grow 2.6 percent this year, slightly lower than the nation’s 2.7 percent rate of growth, and improve to 4.4 percent in 2014.
Professional and business services, leisure and hospitality services, and manufacturing sectors will see marginally slower growth next year compared to this year.
Eating and drinking establishments and food stores will experience strong growth this year.
Taxable sales growth for 2013 is expected to be 3.2 percent, well behind the 4.7 percent growth rate of 2012. It will see modest improvement in 2014 to a projected 3.5 percent.
Automobile dealer sales were especially hot in 2012, up 10.1 percent, as consumers continued to satisfy their demands for vehicle upgrades. A cooling of sales will take place this year, with a rebound to 4.4 percent growth in 2014.
Click here for the full CBER report.

Export growth boosts metro Knoxville economy

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Exports are playing a significant role in Knoxville’s continuing economic recovery, according to a new Brookings Institution report
The value of the metro area’s exports last year totaled $4.29 billion, or 12.7 percent of the region’s total output, according to a the “Export Nation 2013” report released this week.
Motor vehicle parts and miscellaneous fabricated metal products were two largest export sectors at 10. 5 percent and 10.3 percent, respectively, of the region’s export total.
The next largest export sectors were precision instruments, financial services and management & consulting, all at slightly more than 3 percent of the region’s total.
Knoxville ranked 73rd out of the 100 largest metro areas in total value of exports. However, Knoxville’s export growth in the last three years ranked among the best in the country, according to Brookings.
Knoxville’s 11 percent export growth from 2009-2012 ranked 13th nationally.
“Exports have been a critical driver of the post-recession recovery in the U.S. and its metro areas,” said Brad McDearman, director of the Brookings Institution’s Metropolitan Export Initiative and co-author of the report. “Metro leaders that make boosting exports an economic development priority are better positioning their regions for success in the more globally-connected 21st century economy.”
Click here for the full Brookings report.

CHS offer may be best Health Management Associates can expect

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UPDATED: It’s been more than six weeks since Community Health Systems offered to buy competitor Health Management Associates for $7.4 billion and no other bidders have stepped forward.
HMA’s largest shareholder, Glenview Capital Management, called the takeover proposal a low-ball offer and spearheaded a shareholder vote to replace the HMA board with a slate of Glenview independent nominees tasked with getting a better price.
But it’s looking like the CHS offer is the best deal HMA can get, according to a Bloomberg report published today.
“No rival bidders have emerged, and analysts are forecasting a 16 percent profit drop when Health Management reports third-quarter results. That will boost the odds of Health Management investors voting for the deal, UBS AG said. Without the takeover, Health Management owners risk seeing the stock plunge as much as 37 percent, Susquehanna International Group LLP estimates. Shareholders should take the money and run because Health Management faces a challenging turnaround, according to CRT Capital Group LLC,” Bloomberg reported.
Naples, Fla.-based HMA is the parent company of Knoxville-based hospital operator Tennova Healthcare.
CHS is based in Franklin, Tenn.
The future of HMA is being closely watched by Tennova officials and could impact Tennova’s plans to build a new hospital on Middlebrook Pike in West Knoxville.
Click here for the Bloomberg report.

Alcoa says being dumped by DJIA no big deal

Alcoa Inc. Location Manager Ken McMillen, left, Sen. Lamar Alexander, Alcoa CEO Klaus Kleinfeld, U.S. Rep. John J. Duncan Jr., and Gov. Bill Haslam arrive for a groundbreaking for a $275 million expansion of the Alcoa Inc. rolling mill to produce automotive sheet aluminum on Thursday, Aug. 29, 2013, in Alcoa.  (Paul Efird/News Sentinel)

Alcoa Inc. Location Manager Ken McMillen, left, Sen. Lamar Alexander, Alcoa CEO Klaus Kleinfeld, U.S. Rep. John J. Duncan Jr., and Gov. Bill Haslam arrive for a groundbreaking for a $275 million expansion of the Alcoa Inc. rolling mill to produce automotive sheet aluminum on Thursday, Aug. 29, 2013, in Alcoa. (Paul Efird/News Sentinel)

After being booted from the Dow Jones Industrial Average earlier today, aluminum company Alcoa Inc. rushed to assure shareholders the decision was no big deal.
“The composition of the Dow Jones Industrial Average has no impact on Alcoa’s ability to successfully execute our strategy, and we remain focused on delivering shareholder value. We continue to grow our value-add businesses and capture growth opportunities in end markets like aerospace and automotive,” Alcoa said in a statement.
Alcoa, a long time component of the DJIA, has a major manufacturing operation in Blount County. The company recently announced a $275 million expansion of the Blount County plant aimed at producing aluminum for auto manufacturers.
Although the DJIA is generally considered an index of the top U.S. companies, only 30 companies are used to calculate the index. Alcoa remains on the S&P 500, which is a much broader gauge of the market.
Bank of America, and Hewlett-Packard also were removed from the DJIA.
Added to the DJIA were Goldman Sachs, Visa and Nike.
The changes take effect Sept. 23.
Click here for Alcoa’s full statement.

Miller Energy loses $9M despite higher revenue

Miller Energy Resources platform in Cook Inlet, Alaska.

Miller Energy Resources platform in Cook Inlet, Alaska.

Revenues were up, but Miller Energy Resources Inc. lost more than $9 million in the quarter ended July 31, the Knoxville-based oil and natural gas company reported Monday.
Net loss attributable to common stockholders was $9.4 million, or 22 cents per diluted share, for the company’s first quarter of fiscal 2014. That compares to a profit of $200,000 in the same period a year ago.
Revenues for the recently ended quarter rose more than 56 percent to $13 million from $8.4 million in the first fiscal quarter the prior year. Revenues were up on increased production and higher oil prices. Average realized oil prices rose 5 percent to $104.57 per barrel in the first quarter compared with $99.59 in the prior year period.
The revenue increase was off set by a 44 percent increase in costs and direct expenses and  “an increase in interest expense due to higher debt balances and less interest capitalized; and a loss on commodity derivatives,” the company said.
Despite swinging to a first-quarter loss, Miller CEO Scott Boruff gave an upbeat outlook based on increased production.
“We are continuing to see major increases in production in Alaska. In the second half of the first quarter, we brought our RU-2A well online, which has been our highest producing oil well to date. … (Contributing)  $4.1 million to our revenues for the quarter,” Boruff said in a statement.
Progress also is being made on bringing other oil and gas wells into production, Boruff said.
Miller Energy is an oil and natural gas exploration, production and drilling company with operations in Alaska’s Cook Inlet and in Tennessee’s Appalachian Basin.

AMC challenges Regal Entertainment with $400M IPO

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A battle of  movie theater titans is starting to take shape.
AMC Entertainment, the second largest movie theater network in the country after Knoxville-based Regal Entertainment Group, recently announced plans for a $400 million initial public offering.
Proceeds from the IPO are earmarked for expansion and debt payments.
AMC hasn’t offered details of its growth plan, but Regal will undoubtedly be keeping a close eye on the Kansas-based company’s expansion.
AMC was bought last year by Chinese billionaire Wang Jianlin’s Dalian Wanda Group for $2.6 billion.
Wanda bills itself as the largest movie theater operator in the world.
While Wanda may be the world’s biggest, but Regal has a considerable lead over AMC when it comes to the U.S.
AMC currently operates 342 theaters with 4,941 screens in the U.S., according to its website. Regal has 7,340 screens in 576 theaters. Virtually all of Regal’s screens are in the U.S. mainland, although it also has theaters in Guam, Saipan and American Samoa.
Speaking of selling stock, Regal announced Tuesday a secondary offering of 2 million shares of National CineMedia. Regal is a founding member of National CineMedia, a digital in-theater network that offers advertising and special events.
Click here for Bloomberg’s take on AMC’s IPO.

TVA among top power companies for economic development

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TVA has again made Site Selection magazine’s list of power companies that do the best job of economic development.
Knoxville-based Tennessee Valley Authority is one of ten utility companies included on the annual “Top Utilities in Economic Development” list published in the magazine’s September 2013 issue.
The magazine cited TVA for helping to bring “$5.9 billion in corporate facility investment in 2012, expected to create 48,500 jobs across TVA’s 80,000-sq.-mile, seven-state territory with a population of 9 million.”
Site Selection magazine is closely followed by thousands of corporate executives across the country who decide where their companies will invest in new plants and expand existing ones.
TVA has made the magazine’s list each of the last several years.
Given its mammoth service area it’s not surprising that TVA is a major player in the regional economy and it often lands on rankings like this. Still, recognition from Site Selection is a lot better than not making the list at all.
The list is based on  an “analysis of corporate end-user project activity in 2012 in that company’s territory; website tools and data; innovative programs and incentives for business, including energy efficiency and renewable energy programs; and the utility’s own job-creating infrastructure and facility investment trends,” the magazine said.
The power companies are listed in alphabetical order.
Click here for the Site Selection story.