Tenet Amends Bylaws to Appease its Biggest Investor

The healthcare giant agreed to reimburse Glenview Capital Management up to $500,000 in fees and expenses incurred in order to reach the deal.

Tenet Healthcare Corporation and Glenview Capital Management announced Monday that they reached a deal to end their months-long feud over how the hospital operator should be governed.

The companies disclosed their agreement to the Securities and Exchange Commission (SEC), noting that Tenet will reimburse Glenview up to $500,000 within 10 business days, in cash, for the fees and expenses the investment firm incurred in the run-up to the deal.

Glenview—which currently owns more than 17.9 million of Tenet’s 101.2 million outstanding shares, or 17.74%, according to SEC filings—had called last month for governance changes, including the ability for shareholders to vote by proxy without a meeting, citing Tenet’s worse-than-anticipated financial performance.

This came after two Glenview representatives left the Tenet board last August, citing “irreconcilable differences.” Tenet’s CEO announced his resignation shortly thereafter.

For the fourth quarter of 2017, Tenet posted a $230 million loss and continued down a steep path of planned divestitures.

“With this agreement in place, we can continue our work on the initiatives we have underway to position us as a stronger leader in healthcare delivery and create additional shareholder value,” Tenet Executive Chairman and CEO Ronald A. Rittenmeyer said in a joint statement Monday with Glenview founder and CEO Larry Robbins.

“As a long-term shareholder of Tenet and as its largest investor, we firmly believe in the Company’s value creation opportunities and we appreciate steps taken in recent months to enhance Tenet's focus on patient satisfaction, operating efficiency, incentive alignment and corporate governance,” Robbins said.

“We are pleased that these bylaw amendments will benefit all shareholders by providing greater shareholder safeguards and an improved framework for a continuing constructive dialogue between the Board, senior management and owners.”

Tenet agreed on Friday to amend its bylaws in three key ways:

Special meeting: It will revise its special meeting bylaw so that it can be amended only by a majority vote of Tenet shareholders.
Annual meeting: It will require that an annual meeting be held at least every 13 months under a bylaw that can be amended only by a majority vote of Tenet shareholders.

Shareholder rights: It will adopt a bylaw that requires 75% of board members to approve the adoption of any future shareholder rights plan, with a maximum plan length of one year and a 90-day window to seek shareholder approval for an extension.

Glenview agreed, under the terms of the deal, to take three actions of its own:

Proposal withdrawn: It will withdraw its notice that it intended to make a proposal at the 2018 Annual Stockholders’ Meeting.
Limit ownership: It will agree to keep its ownership stake in Tenet at or below 20% for at least one year. (Its current stake is greater than 17% of Tenet’s outstanding shares, according to SEC filings.)
Support nominees: It will vote in favor of all directors the board nominates at the annual meeting, as listed in a document filed March 19 with the SEC.

The full terms of the deal are available on the SEC’s website.