With Pressure From Activist Investor, Enhabit Reveals More Details Around Its Strategic Review

With pressure from an activist investor, Enhabit Inc. (NYSE: EHAB) has released more information surrounding its strategic review, which was completed earlier this month.

Instead of a merger or sale, the Dallas-based home health and hospice company elected to remain an independent, public company.

The activist investor, AREX Capital Management, previously said a sale was the “only acceptable outcome” of the review, which it had encouraged in the first place. Unsurprisingly, the firm was not thrilled with the route Enhabit’s board ended up taking.


“We are disappointed that Enhabit’s strategic review process has concluded without a sale of the company,” AREX Capital wrote in a statement after the announcement. “We do not believe that this failure reflects Enhabit’s intrinsic value or strategic potential. Rather, this failure lies with Enhabit’s board.”

AREX Capital also disclosed that it has nominated a slate of seven “highly qualified candidates” to stand for election at the Enhabit’s 2024 annual meeting, which will take place later this year.

Enhabit on Thursday responded to the nomination of candidates to its nine-person board, detailing what it called a “comprehensive” strategic review process.


“Enhabit, with the assistance of its financial advisor, Goldman Sachs, and its legal advisor, Sidley Austin, ran a comprehensive process that lasted approximately nine months. Goldman Sachs received full leeway to engage potential counterparties,” Enhabit wrote in a statement. “The process involved 38 potential counterparties, including strategic buyers and financial sponsors. Of those parties, 26 executed non-disclosure agreements and nine participated in management presentations.”

Enhabit has 255 home health locations and 112 hospice locations spanning 34 states. It initially launched its strategic review process in August of last year.

“Four parties, consisting of two financial sponsors and two strategic acquirers, provided initial indications of interest,” Enhabit continued. “The parties expressed varying degrees of interest; however, none submitted formal offers despite the company’s extensive efforts to facilitate diligence. Significant headwinds impacted the strategic review process, including regulatory developments related to changes in Medicare Advantage rates and the antitrust landscape, a difficult health care operating environment and persistently high interest rates.”

The company provided further in-depth detail, too, on the conversations it had during the strategic review process.

It also wrote that its board remains “steadfast” in its commitment to maximize shareholder value, and that it will continue to evaluate opportunities that aid that effort.

The eight independent directors nominated for reelection to the Enhabit board at the annual meeting also issued a statement.

“Enhabit’s strategic alternatives process was robust and included outreach to a significant number of potentially interested third parties,” they wrote. “In addition, Enhabit issued a public announcement of the process to ensure that other potential counterparties would be aware of the process. After nine months and having received no actionable proposals, despite giving the most interested parties an abundance of time to submit such a proposal, the board unanimously determined to conclude the strategic review. We remain confident the company has taken the right steps to improve financial and operational results, enhance growth and create significant value for all Enhabit stockholders. We are disappointed that AREX has initiated a proxy contest to take control of the board in the wake of the extensive strategic review that they demanded.”

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