Mar 6, 2009 -
Eastern Connecticut Health Network, Inc. (ECHN) has provided notice to Johnson Memorial Corporation (JMC) that the Asset Purchase Agreement (APA) to acquire JMC's assets is being terminated effective immediately due to a number of issues identified in the due diligence process.
These issues include a recent, additional demand by JMC that ECHN commit up to $7 million for a connection to the public sewer system or withdraw as a buyer, recent financial due diligence discoveries, and the ongoing challenge of obtaining accurate information from JMC.
Months have passed since we entered into an agreement to acquire the assets of JMC so that we could enhance the services we provide to the greater Stafford/Enfield areas. ECHN has worked diligently toward an acquisition. While ECHN has not ruled out an acquisition, it has determined that the current arrangement is no longer appropriate due to various significant issues.
Recent reports of declining volumes and revenue at JMC, coupled with needed (and State mandated) significant capital investments for the Johnson Memorial Hospital (JMH) campus that have recently come to light, do not make us confident that an acquisition would produce a viable new Johnson health care system. ECHN will be assessing whether steps can be taken to structure an acquisition of JMC that provides a future for the Johnson health care system.
The termination of the current APA is in no way related to the recent staff reductions at ECHN. In spite of the economy, ECHN remains a financially strong institution. However, ECHN needs to be responsible and must be assured that an acquisition would produce a viable new Johnson health care system. ECHN does not have that comfort level at this time.
While ECHN is troubled by the impact that the termination of the APA will have on the community served by JMC, it has an obligation to act responsibly and to ensure that we can continue to serve our communities in accordance with our charitable mission.