September 5, 2017

Tenet Healthcare CEO to step down

Daily Briefing

    Tenet Healthcare Chair and CEO Trevor Fetter will resign from his roles as CEO and director by March 15, 2018, or when a new executive is found, the health system announced on Thursday.

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    Tenet said it is also "refresh[ing]" the composition of its board of directors, beginning with the immediate replacement of Fetter in his role as chair with Ronald Rittenmeyer, who previously served as an independent lead director. Tenet did not detail who else on the board would be affected by the changes, but officials said they "expec[t] to further enhance the board's expertise in areas directly relevant to the company's business."

    The announcements came one day before Tenet's standstill agreement with Glenview Capital Management—Tenet's largest institutional shareholder, with an 18 percent stake in the company—expired, the Wall Street Journal reports.

    According to Becker's Hospital Review, the standstill agreement was reached in 2016, when Glenview agreed not to increase its stake in the company beyond 25 percent or engage in a hostile takeover in exchange for the placement of two Glenview employees, Randy Simpson and Matt Ripperger, on Tenet's board. According to Becker's Hospital Review, Simpson and Ripperger resigned just days prior to the announcement, citing "irreconcilable differences," which effectively ended the standstill agreement.  

    Tenet last week also enacted a shareholder-rights plan which allows existing shareholders to acquire more shares at a 50 percent discount if any one individual or entity purchases at least 4.9 percent of Tenet stock. That plan, according to the Wall Street Journal, "in effect would halt (Glenview) from building upon its stake." According to Tenet, the plan will protect $1.7 billion in net operating loss carryforwards and will sunset after the organization's next annual meeting.

    Glenview declined to comment to the Wall Street Journal, but when its employees left the Tenet board, they indicated that Glenview could "further explore ways to strengthen the company."

    Comments

    Rittenmeyer said the changes announced last week "will ensure Tenet remains focused on providing high quality care to patients, innovating in ways that meet the demands of today's health care market, and driving operational and financial performance in a manner that maximizes shareholder value."

    Separately, Fetter said of the announcements, "I am proud of what we accomplished in transforming the Company, and strongly believe the 130,000 Tenet employees will continue focusing every day on advancing the Company's mission." He added, "I have no doubt that Tenet will be a leading force in creating a better health care system and I look forward to assisting during the transition" (Hufford/Benoit, Wall Street Journal, 8/31; Japsen, Forbes, 8/31; Barkholz, Modern Healthcare, 8/31; Gamble, Becker's Hospital Review, 8/31; Tenet Healthcare press release, 8/31).

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