Ascension discussing merger with Providence St. Joseph Health

WSJ: Deal could create largest U.S. hospital operator.

  • By Mark Basch
  • | 8:18 a.m. December 18, 2017
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The parent company of St. Vincent’s HealthCare is in merger talks that could create the largest U.S. hospital operator, the Wall Street Journal reported last week.

St. Louis-based Ascension is discussing a merger with Providence St. Joseph Health, although it is uncertain if a deal will be reached, the newspaper said.

Ascension operates 141 hospitals in 22 states, mostly in the eastern U.S., including the three St. Vincent’s medical centers in the Jacksonville area.

Providence St. Joseph has 50 hospitals in seven western states. With 191 hospitals between the two, a merged company would be bigger than the current largest U.S. operator, HCA Healthcare Inc., which has 177 hospitals.

Publicly traded HCA’s facilities include Memorial Hospital on Jacksonville’s Southside and the Orange Park Medical Center.

Ascension and Providence St. Joseph are faith-based nonprofit organizations. Even without the merger, Ascension says it is the nation’s largest nonprofit health system and the world’s largest Catholic health system.

Ascension’s three local hospitals, all named St. Vincent’s, are in Riverside, Southside and Middleburg.

St. Vincent’s also has health centers in Mandarin and in St. Johns County, and a number of primary care/specialist offices in the area.

CVS deal unlikely to impact Aetna Jacksonville office

The Ascension-Providence St. Joseph talks continue a wave of major health care deals and follow another merger announced the previous week that will affect Jacksonville.

CVS Health Corp. agreed on Dec. 3 to buy Aetna Inc. for $69 billion.

Aetna last summer moved about 800 employees from its office on the Southbank to Gramercy Woods on the Southside.

Aetna’s media relations department did not respond to emails about how or if the merger would affect its Jacksonville operations, but the companies are indicating that Aetna’s operations will remain intact. The health insurance business will operate as a stand-alone subsidiary of CVS.

During a meeting with CVS employees, CEO Larry Merlo mentioned the Jacksonville office.

“Aetna has a distributed workforce. They have a big presence in Hartford, but they also have a big presence in Scottsdale, and Columbus, Ohio, and Jacksonville, Florida,” Merlo said, according to a transcript posted by CVS in a Securities and Exchange Commission filing.

“So, obviously, one of the questions is, ‘Well, what does this mean for me? Is there going to be a lot of job loss?’ and things of that nature,” he said.

“The reality is the fact that we’re bringing new businesses to CVS Health (and) we need the folks that are running those businesses today to continue to run those businesses as part of CVS Health.”

FDIC lifts Ameris consent order

Ameris Bancorp said Thursday the Federal Deposit Insurance Corp. terminated the consent order it issued to the banking company, nearly a year after it was imposed.

The consent order prevented Ameris from pursuing acquisition opportunities. It was issued because of noncompliance with the Bank Secrecy Act, a federal law requiring banks to help the government prevent money laundering.

Ameris blamed the problem on software issues, which it said it fixed, and it has been expecting the FDIC to lift the order.

Ameris, which has its executive offices in Jacksonville, agreed last month to buy Jacksonville-based Atlantic Coast Financial Corp. in anticipation of the consent order being lifted.

With the regulatory issue settled, Ameris expects to close that deal in the second quarter of 2018.

Landstar declares special dividend

Landstar System Inc. last week declared a special one-time cash dividend of $1.50 per share, payable in January.

The Jacksonville-based trucking company, which has been paying regular quarterly dividends of 10 cents a share, has a history of declaring special dividends at the end of a year.

Landstar last did it in December 2014, announcing a $1 dividend.

Landstar, which also announced a plan to repurchase additional shares of stock, said it had $295 million in cash and short-term investments and $217 million available for borrowing from a credit facility.

“Landstar believes its financial strength enables us to continue to return value to our stockholders through a significant increase to our stock purchase program coupled with a special dividend,” CEO Jim Gattoni said in a news release.

J.P. Morgan downgrades, FIS

As J.P. Morgan analysts began looking ahead to 2018, they downgraded two Jacksonville-based companies last week, Group Inc. and Fidelity National Information Services Inc., or FIS.

Software technology analyst Sterling Auty downgraded from “overweight” to “neutral,” after strong gains for the stock this year.

“The stock is up 45 percent over the last 52 weeks as compared to 20 percent for the S&P 500 over the same timeframe,” Auty said in his report.

“The improvement in subscriber economics is developing slower than we originally anticipated, but shares are still attractively valued. These balancing forces are what underscores our neutral rating.”

Payments and processors analyst Tien-tsin Huang downgraded FIS from “overweight” to “neutral.”

“We believe growth upside in 2018 will be harder to come by, absent a large acquisition, now that the SunGard synergies have largely played out,” Huang said in his report.

FIS acquired SunGard Data Services Inc. two years ago.

“Another acquisition is possible, but given uncertainty in timing and the fact that we are below consensus on 2018 estimated revenue, we are moving to the sideline with a neutral rating with average EPS growth versus peers,” Huang said.

Huang said he is more cautious overall on financial technology stocks, “given high growth and valuations for the group.”

However, he rates another Jacksonville-based company, Black Knight Inc., as the only “overweight” stock in the sector.

Black Knight, which provides mortgage technology for financial institutions, basically was created from operations that were once spun off from FIS, which provides a range of technology services for banks.

“We believe timing is favorable for Black Knight to monetize its position as the scale leader in providing mission-critical tech services to the mortgage industry, which is in need of standardized compliant solutions on the back of the credit crisis,” Huang said. 

“Secular tailwinds mixed with industry utility economics put Black Knight’s organic growth and margins near the top of our FinTech coverage to support our overweight rating.”

FIS executive leaving Jan. 12

FIS said in an SEC filing last week that Executive Vice President and Co-Chief Operating Officer Anthony Jabbour is resigning, effective Jan. 12.

Jabbour is leaving to pursue another opportunity, the filing said, but it provided no other details.

Another Advanced Disposal ‘buy’

When KeyBanc Capital Markets analyst Joe Box rated Advanced Disposal Services Inc. last month at “sector weight,” he said Wall Street may be too optimistic about the Ponte Vedra-based waste management company.

That was because eight of nine other analysts rated it as a “buy.”

Well, now it’s almost unanimous. Stifel analyst Michael Hoffman last week upgraded his rating on Advanced Disposal from “hold” to “buy,” meaning all analysts – except Box – following the company now have it as a buy.

“The buy case for Advanced Disposal is about organic growth driving operating leverage that produces better cash conversion and leads to lower leverage,” Hoffman said in his research note.

Hoffman had downgraded Advanced Disposal to “hold” in October as part of an overall downgrade of solid waste company stocks.

Gun maker reports sharp sales drop

American Outdoor Brands Corp. dropped to a 52-week low after reporting a sharp drop in firearms sales.

The parent company of gun maker Smith & Wesson and other outdoor products businesses said sales in the second quarter ended Oct. 31 fell 35.4 percent to $148.4 million, with firearms sales dropping 48 percent.

Adjusted earnings dropped to 11 cents a share, down from 68 cents the previous year.

“Total revenue for the quarter faced a challenging comparison to last year, when we believe strong consumer demand was driven by personal safety concerns and pre-election fears of increased firearm legislation,” CEO James Debney said in a news release.

Those fears were erased last year when Donald Trump won the presidential election as the Republican Party controlled both houses of Congress.

Meanwhile, sales of the company’s outdoor products and accessories rose 23 percent to $48.1 million, helped by the acquisition last year of a Jacksonville-based company called Ultimate Survival Technologies.

American Outdoor Brands did not give sales data for the UST business, but it said the company was producing annual sales of $24 million when it announced the deal last year.

American Outdoor Brands’ stock dropped as much as $2.47 to $12.46 on Dec. 7 after the earnings report.



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