Enhabit (NYSE: EHAB) investors elected one of AREX Capital Management’s director nominees after the activist investor called on them to replace seven of the home health and hospice provider’s directors to help improve financial performance.
Enhabit said on Thursday shareholders added Mark Ohlendorf to the board and re-elected eight of the company’s nine legacy directors, including the chief executive officer and two directors who joined last year when Enhabit reached an agreement with another activist investor.
Reuters first reported AREX won one seat and that Ohlendorf, who has experience as a public company chief financial officer, was chosen. He will replace Susan LaMonica who joined Enhabit’s board as an independent director in 2022.
Enhabit’s fight with AREX is one of only a handful of activist investors’ campaigns to have made it to a vote this year, underscoring many investors’ and companies’ preference to reach agreements for board seats and other concessions before shareholders weigh in.
While Enhabit (NYSE: EHAB) has many hedge fund investors who were thought to back AREX, it also counts the three main index funds – BlackRock, Vanguard, and State Street – as big shareholders. In this vote those three sided with management’s candidates, sources familiar with the preliminary vote tally said.
These investors ignored the recommendations of proxy advisory firms Institutional Shareholder Services (ISS) and Glass Lewis who had urged investors to elect three AREX nominees, arguing the company needed more expertise in the home health and hospice business and public company financial reporting.
Enhabit’s share price has tumbled roughly 60% since it was spun off of post-acute healthcare services provider Encompass Health in July 2022. It climbed nearly 10% in the last five days and was up about 4% in midday trading on Thursday.
AREX, which owns a 4.9% stake in Enhabit, urged management last year to immediately start a strategic review. Enhabit in May decided to continue as an independent company and urged investors to stick with its directors now, arguing big changes could jeopardize recent improvements.
In 2023, the company reached a settlement with Cruiser Capital and Harbour Point Capital Management and appointed two new directors to the board.
(Source: ReutersReuters)
