Tenet to replace CEO Trevor Fetter, 'refresh' board and adopt poison pill

Dallas-based Tenet Healthcare is replacing longtime CEO Trevor Fetter and "refreshing" the composition of its board of directors.

Mr. Fetter has led the 77-hospital chain since 2003. He will step down by March 15, 2018, or when the company appoints a successor, whichever occurs first. Tenet has already begun the executive search.

Tenet has also begun a refreshment process for its board, beginning with the appointment of a new executive chairman: Ronald A. Rittenmeyer, who previously served as independent lead director. Tenet did not specify how many board members will be affected by the refreshment process, though it "expects to further enhance the board's expertise in areas directly relevant to the company's business."

News of changes to Tenet governance comes days after board members Randy Simpson and Matt Ripperger resigned "due to irreconcilable differences regarding significant matters impacting Tenet and its stakeholders," the two jointly wrote in a letter to the board. Mr. Simpson and Mr. Ripperger are employed by Glenview Capital Management, a Tenet stakeholder. 

In an agreement executed in January 2016, Tenet put Mr. Simpson and Mr. Ripperger on its board in exchange for Glenview Capital Management agreeing not to up its stake in Tenet beyond 25 percent or join efforts by other investors to oust Tenet's management or force a sale of the company.

The expiration of the restrictive standstill agreement was triggered when Mr. Simpson and Mr. Ripperger stepped down from Tenet's board Aug. 17. Mr. Simpson and Mr. Ripperger noted that when the agreement expires Sept. 1, "Glenview may evaluate other avenues to be a constructive owner of Tenet." 

Finally, Tenet's board approved a short-term shareholder rights plan, effective Thursday. The defensive plan is designed to protect $1.7 billion in net operating loss carryforwards and ensure the board can protect all shareholder interests as it executes CEO and board changes. Those loss carryforwards are operating expenses on Tenet's tax return that exceeded revenues and can be used for the following 20 years as an offset to taxable income.

Under the poison pill, if any person or entity acquires 4.9 percent or more of Tenet stock, all holders of rights issued under the plan are entitled to acquire shares of common stock with a 50 percent discount.

The plan is scheduled to expire after Tenet's 2018 annual meeting of stockholders.

Tenet ended the second quarter of this year with a net loss of $56 million, compared to a net loss of $44 million in the same period of the year prior.


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