AREX Capital to mount board challenge against Enhabit, sources say

Encompass Health

09/05/2024 13:01

By Svea Herbst-Bayliss
       May 9 (Reuters) - Hedge fund AREX Capital Management is
seeking seven board seats at Enhabit  EHAB.N , arguing that new
directors are needed to help reverse poor financial performance
at the U.S. home health and hospice provider, people familiar
with the matter said on Thursday.
    AREX, which has been pushing Enhabit to put itself up for
sale, privately nominated the seven candidates in March during
the company's nominating window, the sources said. The AREX
nominees have healthcare and capital markets experience and
include an AREX partner, James Corcoran, the sources said.
    Enhabit this week said it decided to continue as an
independent, public company after having evaluated a range of
strategic options. A company representative was not immediately
available for comment on the AREX board challenge.
    AREX has argued that the board lacks home hospice expertise,
which it says its candidates can provide. AREX kept its
nominations private until now because it did not want to disrupt
the strategic review process, the sources said.  
    The Enhabit board currently has 13 members but will be
reduced to nine at the company's annual meeting later this year.
    Enhabit was spun off from post-acute healthcare services
provider Encompass Health in July 2022, and since then its
shares have lost more than half of their value. Shares closed
trading at $9.70 on Wednesday.
    AREX had told the company last year that it wanted it to
commit immediately to start a review before the end of 2023 and
close any potential transaction after the two-year anniversary
of the spinoff to avoid tax complications.
    Enhabit agreed with investors Cruiser Capital and Harbour
Point Capital Management in March 2023 to refresh its board by
adding two new directors who have experience in healthcare
consulting and information technology. 

 (Reporting by Svea Herbst-Bayliss
Editing by Greg Roumeliotis)
 ((svea.herbst@thomsonreuters.com; +617 233 2138; Reuters
Messaging: svea.herbst.thomsonreuters.com@reuters.net))