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WakeMed urges UNC to begin talks on Rex bid

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WakeMed leaders are urging UNC officials to begin negotiations on their hostile $750 million bid to buy rival Raleigh hospital Rex Healthcare.

In a letter delivered Wednesday to UNC president Tom Ross, WakeMed CEO Bill Atkinson and chairman Tom Oxholm wrote that they want to close the acquisition "on or before" Dec. 31.

"We think it could be done by the close of the year, assuming everyone wants it to happen and we put teams in place on both sides to make it happen," Atkinson said in a phone interview today.

"We hope the state of North Carolina and UNC will look at this in a timely and fair and serious manner," he added. "We have a very viable proposal and it could be a big plus to the state of North Carolina economically."

Still, a sale is far from certain.

UNC officials have made clear that while they will review WakeMed's offer, they're not interested in selling Rex, which is a foundation of the UNC Health Care System's expansion strategy in Wake County. Ross had recently requested more information from WakeMed, which made the unsolicited offer to buy Rex last month.

"While the letter received today is far less comprehensive than anticipated, I am forwarding it to Chairman Richard Krasno for careful review by the UNC Health Care Board, in keeping with its fiduciary responsibilities," Ross wrote in a note to UNC's board. "We continue to believe that Rex is an integral part of UNC Health Care that is vital to our teaching, research and clinical care missions."

As part of its offer to buy Rex, WakeMed is willing to expand its relationship with UNC in terms of research, teaching and innovation, Atkinson said. WakeMed and UNC have worked together for more than 40 years, with UNC sending its medical students and physicians to work at WakeMed's facilities, for example.

"There is potential for UNC to lock themselves with us in this market for generations to come," Atkinson said. "But we can't compete with Rex and be friends with UNC."

The offer to buy Rex followed months of increasing hostility between WakeMed and UNC Health. WakeMed officials contend that UNC and Rex are using their status as a state-supported hospital system to unfairly compete in Wake County's medical market.

In their letter, Atkinson and Oxholm acknowledge that a deal could be pushed back later than Dec. 31, but wrote that WakeMed could close an acquisition about 150 days after UNC agrees to a sale.

The Dec. 31 deadline "is general in nature, but we don't want to let it drag on forever," Atkinson said.

"We look forward to meeting with President Ross or whoever he appoints to look at this," Atkinson said. "We'll do that anywhere, anytime."

The WakeMed letter also addressed other questions Ross raised:

-- WakeMed expects to pay for the deal, worth up to $875 million with the assumption of Rex's debt, with cash reserves and the proceeds from one or more bond offerings.

WakeMed is getting financial advice from the investment banking arm of Citigroup. Citigroup also would serve as senior manager for the tax-free bonds, which would be issued through the N.C. Medical Care Commission.

--WakeMed expects its takeover of Rex will pass the scrutiny of antitrust regulators because of the "robust competition" in the Triangle's health-care market.

Competitors include the Duke University Health System, UNC Health, WakeMed and "multiple other providers."

"The same competitors and robust competition will remain in the market after the completion of the proposed transaction," Aktinson and Oxholm wrote.

-- WakeMed would offer jobs to "substantially all employees of Rex Healthcare, subject of course to WakeMed's customary screening and hiring policies."

-- Rex employees who are hired would be eligible to participate in a profit-sharing program at WakeMed, and salaries and benefits comparable to what they now receive.

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About the blogger

Assistant Business Editor Alan M. Wolf joined the N&O in 1999 covering the business of health care. He became an editor in 2001, and helps oversee the paper's daily business coverage and Sunday Work&Money section. He lives in Clayton with his wife and two children. Reach him at 919-829-4572 or e-mail him.
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