Health Management Associates Inc (NYSE:HMA) and Community Health Systems (NYSE:CYH) announced Tuesday that the latter has agreed to acquire the former in a $3.9 billion cash and stock deal. Health Management Associates’ shares plunged heavily in the early session after the company said that regulators have issued additional subpoenas on its practices.

Health Management Associates has already received subpoenas from SEC for documents related to contractual adjustments, revenues, reserves for doubtful accounts, billing write-downs and accounts receivable.

Health Management Associates HMA

Community Health Systems (NYSE:CYH) will be paying Health Management Associates Inc (NYSE:HMA) shareholders $13.78 per share, plus 16 percent stake in the new company. Health Management Associates shareholders will also receive a contingent value right that could add up to $1 per share based on the results of various legal proceedings. The deal comes at a time when the U.S. government plans to overhaul the country’s healthcare system.

Glenview was putting pressure on HMA

Activist hedge fund Glenview Capital Management has been putting pressure on Health Management Associates Inc (NYSE:HMA) for several months. Glenview owns 14.6 percent stake in the company. The Lawrence Robbins-led hedge fund had threatened to oust Health Management Associates’ board and top management because of their substandard approach to corporate governance.

The companies said that Community Health Systems (NYSE:CYH) will also assume $3.7 billion debt, which takes the deal to $7.6 billion. Data compiled by Bloomberg shows that the deal values Health Management Associates Inc (NYSE:HMA) at 8.3x EBITDA for the past 12 months.

It’s the best deal for Health Management Associates

Analysts believe that this acquisition is the best offer Health Management Associates Inc (NYSE:HMA) shareholders could get. Health Management Associates stock is tumbling due to pathetic fundamentals. The deal is expected to close in the first quarter of 2014. It’s the biggest acquisition in the U.S. hospital industry since 2006, when KKR & Co. L.P. (NYSE:KKR) acquired HCA Inc. for $33 billion.

Community Health Systems (NYSE:CYH) runs 135 hospitals with a combined capacity of 20,000 beds. The company posted a revenue of $13 billion last year. The smaller Health Management Associates Inc (NYSE:HMA) has 71 hospitals with 11,000 beds. Health Management Associates posted a revenue of $5.88 billion in 2012.

Health Management Associates Inc (NYSE:HMA) shares sank 10.66 percent to $13.33, while Community Health Systems (NYSE:CYH) fell 1.23 percent to $46.66 at 11:19 AM EDT.