August 18, 2017 / 12:52 PM / 4 months ago

Glenview directors leave Tenet board, cite irreconcilable differences

NEW YORK (Reuters) - Glenview Capital Management, Tenet Healthcare Corp’s (THC.N) largest shareholder, pulled its two representatives off the hospital company’s board, citing “irreconcilable differences” over strategy.

Tenet said on Friday that Glenview executives Randy Simpson and Matt Ripperger had resigned from the board on Thursday. The company’s shares rose 11 percent in morning trading as Glenview takes a more activist stance.

In a letter Tenet filed with the U.S. Securities and Exchange Commission, Simpson and Ripperger said they had decided “the most effective way forward to promote strong patient satisfaction and long-term value creation for Tenet is to step off this board.”

Hedge fund Glenview owned nearly 18 percent of Tenet’s shares as of June 30, according to Thomson Reuters data. That stake would be worth around $225 million at yesterday’s close.

The fund -- run by billionaire Larry Robbins -- has reported a stake in Tenet since 2012, but only put its representatives on the board last year. At the time, they signed a support and standstill agreement with Tenet that prevented the company from taking part in or aiding an activist campaign against the company.

The agreement also put significant restrictions on Glenview’s trading in Tenet’s securities.

The former directors said in the letter that stepping down from the board triggers the expiration of that agreement in 15 days. “Glenview may evaluate other avenues to be a constructive owner” of the company, they added.

Simpson and Ripperger said Glenview was fully committed to its stake in Tenet.

Earlier this month, Tenet slashed its earnings forecast due to fewer patient admissions and weak results from its Conifer unit, which provides technology and financial services to hospitals and health care companies.

    The company’s shares have lost around 75 percent of their value since 2015. They have also seen a sharp drop in the last month, falling from more than $21 on July 24 to $12.65 on Thursday.

    “We don’t know the particulars of the disagreement, nor which side wanted what. But we do know that THC’s results have been weak, the free cash flow poor, the prospects cloudy,” Mizuho Securities analyst Sheryl Skolnick wrote in a research note.

    Skolnick expects the situation to become “even more interesting now, potentially through a proxy fight.”

    New York-based Glenview has focused on the healthcare industry, a bet that paid off in the years after the Affordable Care Act passed, but that hit its portfolio hard when shares of the companies fell starting in late 2015. The fund’s annual returns fell 18.1 percent that year, but have since rebounded, and are up 14.3 percent year-to-date, according to HSBC.

    Tenet shares were up $1.35, or 10.6 percent, at $14 in morning trading on the New York Stock Exchange.

    Reporting by Michael Erman; Editing by Lisa Von Ahn and Phil Berlowitz

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