CHS Moves to Populate Tenet Board with Takeover Supporters

Community Health Systems, Inc. on Friday said it would back a full slate of 10 nominees for the Tenet Healthcare Corp. board of directors at the rival hospital company’s annual meeting this fall in an attempt to oust the current board, which in December rejected CHS’s $3.3 billion unsolicited takeover offer.

CHS Chairman/CEO/President Wayne T. Smith said the action was necessary because the current Tenet board refuses to discuss what he has called a generous acquisition offer that would benefit Tenet shareholders.

“By just saying no to our 40% premium offer, installing a poison pill with a 4.9% trigger, and delaying the 2011 Annual Meeting for six months -- instead of entering good-faith discussions with us -- Tenet’s highly paid board has clearly demonstrated its entrenchment,” Smith said. “Tenet shareholders deserve better. Accordingly, we have today taken the first step in running a full slate of 10 highly qualified independent directors to replace the existing Tenet board. If elected, these directors will act in the best interest of Tenet’s shareholders and carefully evaluate the value-creation opportunity represented by the CHS offer.”

On Nov. 12, 2010, CHS made an unsolicited offer to buy Tenet for $6 per share, including $5 per share in cash and $1 per share in CHS common stock. CHS said at the time that the offer was a premium of 40% over Tenet’s unaffected stock price. The offer was rejected by Tenet’s board on Dec. 6, and CHS made public the details of the offer on Dec. 9.

Tenet issued a statement Friday defending its rejection of the CHS offer, and noting that the company’s board had “delivered strong growth for more than five years.”

“We believe that Community Health has nominated its slate of director candidates only to advance its goal of acquiring Tenet at an inadequate price. We are confident that the continued execution of our strategic plan will deliver significantly more value to our stockholders than Community Health’s inadequate proposal,” Tenet said in a written statement.

 “We firmly believe that Tenet’s stockholders – not Community Health – deserve to benefit from this growth. Tenet’s Board and management team will continue to act in the best interests of all its stockholders, and remain focused on executing our core business plan and capitalizing on Tenet’s leading position in healthcare services,” Tenet said.

Tenet delayed its 2011 annual meeting for six months, until Nov. 3, and its entire board is up for reelection.

CHS said its nominees are:

• Thomas Boudreau, 59, who most recently was executive vice president, law and strategy of Express Scripts, Inc. and previously served as senior vice president and general counsel of Express Scripts.
• Duke K. Bristow, 53, an economist at the Marshall School of Business at the University of Southern California, and a specialist in corporate governance and finance.
• John E. Hornbeak, 63, is an executive in residence in the Department of Healthcare Administration at Trinity University, and was president/CEO of the Methodist Healthcare System of San Antonio, TX.
• Curtis S. Lane, 53, a healthcare mergers and acquisitions banker, and senior managing director of MTS Health Partners, LP, a merchant bank providing advisory and investment services to healthcare organizations.
• Doug E. Linton, 63, a self-employed consultant through DEL International, LLC, a pharmaceutical channel management consulting company.
• Peter H. Rothschild, 55, managing member of Daroth Capital LLC.
• John A. Sedor, 66, is president, director/CEO of CPEX Pharmaceuticals, Inc.
• Steven J. Shulman, 59, a senior advisor to Warburg Pincus and is an operating partner at Water Street Healthcare Partners and Tower Three Partners. Previously, he was chairman/CEO of Magellan Health Services.
• Daniel S. Van Riper, 70, CPA, an independent financial consultant.
• David J. Wenstrup, 46, a consultant with Clinton Climate Initiative.

Alternate candidates are:

• James O. Egan, 62, non-executive chair of PHH Corp. Previously, he was managing director, Global Private Equity at Investcorp International, Inc.
• Jon Rotenstreich, 67, managing partner of RF Partners, a financial advisory and investment firm, and a founding principal of Bayer Properties Inc., a real estate development company.
• Gary M. Stein, 60, a principal at the Stein Consultancy, LLC. He served as president/CEO and director of Touro Infirmary Health System, and chairman of the Metropolitan Hospital Council of Greater New Orleans.
• Larry Yost, 72, former chairman/CEO of ArvinMeritor, Inc., an automotive supplier.

Community Health is located in Franklin, TN, and is the largest publicly traded hospital company in the U.S., with 126 hospitals in 29 states and 19,400 licensed beds. It also says it is a leading operator of non-urban and mid-size market general acute care hospitals.

Based in Dallas, Tenet owns 49 acute care hospitals in 11 states, 64 outpatient centers and has 57,000 employees.