April 9, 2019 / 3:15 PM / 5 months ago

Cerner settles with hedge fund Starboard: to add new directors, increase buybacks

(Reuters) - Healthcare information company Cerner Corp said on Tuesday it reached a settlement with activist hedge fund Starboard Value LP to add new directors to its board and buy back more of its shares, sending the stock up as much as 15.6 percent.

Cerner has agreed to improving operations and committing to hitting certain operating targets. Cerner said it hired consulting firm AlixPartners to review operations and costs.

Cerner said it will increase its share repurchase program by $1.2 billion and has targeted operating margins of 20 percent for the fourth quarter. The company plans to pay for the buybacks with cash from operations and by issuing debt.

“We are committed to delivering significant operating margin improvement and returning capital to our shareholders, while maintaining an unwavering focus on delivering value to our clients,” Cerner Chairman and Chief Executive Officer Brent Shafer said in a statement.

Cerner’s stock, which has gained 1.2 percent in the last 52 weeks, rose 12 percent to $64.56 after hitting a session high of $66.02.

John Greisch, Halsey Wise, Melinda Mount and George Riedel will join the board immediately and serve on its newly formed Finance and Strategy Committee that will be chaired by Greisch. He and Wise were chosen by the company while Riedel and Mount were nominated by the hedge fund, according to a regulatory filing.

Starboard, which owns about 1.2 percent of Cerner’s shares, mounted seven new campaigns in the first quarter and received board seats at eBay Inc and Papa John’s International Inc. On Friday it withdrew its slate of directors at Dollar Tree Inc.

Reporting by Svea Herbst-Bayliss; Editing by Jeffrey Benkoe

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