Enhabit Shares In-Depth Insights on Comprehensive Strategic Review

Today, Enhabit announced that it has filed its preliminary proxy materials with the Securities and Exchange Commission (the “SEC”) for its upcoming 2024 Annual Meeting of Stockholders. The preliminary proxy statement is available on the Investor Relations section of the Enhabit website at investors.ehab.com.

The preliminary proxy statement was filed in response to AREX Capital Management, LP (“AREX”) notifying the company of its intent to nominate seven candidates for election to Enhabit’s nine-member board at the 2024 Annual Meeting.

Enhabit also provided additional information regarding its recently concluded strategic review process. Key details include:

  1. Comprehensive Review: Enhabit, with the help of Goldman Sachs as financial advisor and Sidley Austin as legal advisor, conducted a thorough nine-month strategic review. Goldman Sachs was given full authority to engage with potential counterparties.
  2. Engagement: The process involved 38 potential counterparties, including strategic buyers and financial sponsors. Of these, 26 signed non-disclosure agreements, and nine participated in management presentations.
  3. Indications of Interest: Four parties, consisting of two financial sponsors and two strategic acquirors, provided initial indications of interest. However, no formal offers were submitted despite extensive efforts to facilitate due diligence.
  4. Challenges: The strategic review faced significant headwinds, including regulatory changes in Medicare Advantage rates, a challenging healthcare operating environment, and high interest rates.
  5. Board Involvement: The Board, which includes two directors appointed as part of a cooperation agreement with Cruiser Capital and Harbour Point Capital, was actively engaged throughout the process. The Enhabit Board and management remain committed to maximizing stockholder value and will continue to explore all opportunities.

The eight independent directors nominated for reelection at the 2024 Annual Meeting issued the following statement:

Enhabit’s strategic review process was robust and involved outreach to numerous potentially interested third parties. Despite not receiving actionable proposals after nine months, the Board remains confident in the steps taken to improve financial and operational results, enhance growth, and create value for all stockholders. We are disappointed that AREX has initiated a proxy contest to take control of the Board following the extensive strategic review they demanded.

On May 8, 2024, Enhabit announced that the Board had unanimously decided to terminate the strategic review after receiving no formal proposals from the 38 potential counterparties involved over the nine-month process.

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