Enhabit Inc. (NYSE: EHAB) stays on the defensive in opposition to activist investor AREX Capital Administration.

Final month it offered extra particulars on its accomplished strategic evaluate, which defined the rationale behind remaining an unbiased firm, slightly than a merger or sale. On Monday, it laid out its reasoning behind its previous struggles, its plan for future success, and most significantly, why it believed shareholders ought to assist its elected board members, not these of AREX Capital.

AREX Capital has nominated new board members previous to Enhabit's annual assembly.

“At our upcoming 2024 Annual Assembly of Shareholders, you’ll have to make an essential determination about the way forward for Enhabit Dwelling Well being & Hospice – whether or not to interchange our board and switch management of Enhabit to certainly one of our shareholders, AREX Capital Administration,” Enhabit wrote in a letter to its shareholders. “Your present Board of Administrators unanimously believes that the reply to this query is an emphatic no.”

Enhabit, primarily based in Dallas, has 255 residence care places and 112 hospice places throughout 34 states.

AREX Capital was one of many fundamental the explanation why Enhabit initiated a strategic evaluate within the first place. After battling for a number of quarters in a row, AREX Capital – which owns 4.9% of Enhabit shares – demanded a strategic evaluate, then deemed a sale the “solely acceptable consequence” of that evaluate.

As soon as that strategic evaluate ended with out a sale, it introduced its intentions on the annual assembly.

Enhabit subsequently launched a extra detailed overview of the strategic evaluate, in addition to the the explanation why it believed this was not the proper time for a transaction.

AREX Capital subsequently responded with one other open letter.

“We’re disenchanted that the board has chosen to proceed its sample of deflecting the official and critical considerations of its shareholders,” it wrote in late Could. “It seems that the Board of Administrators is in search of methods to thwart the true homeowners, slightly than appearing of their finest pursuits to maximise the worth of the corporate. That is on the coronary heart of why we really feel we now have no alternative however to take the steps essential to reconstitute the Board of Administrators.”

The nominees for the AREX Capital board embody: Megan Ambers; James T. Corcoran; Maxine Hochhauser; Mark Ohlendorf; Anne-Gene O'Neal; Dr. Gregory S. Sheff; and Juan Vallarino.

Ambers was beforehand Chief Human Assets Officer at Amedisys Inc. (Nasdaq: AMED) and was with the corporate for 4 years, from 2018 to 2022. Houchhauser has frolicked at Amedisys, Addus HomeCare Corp. (Nasdaq: ADUS) and LHC Group. Ohlendorf is the previous CFO of Brookdale Senior Residing (NYSE: BKD), and O'Neal was the president of Brookdale's healthcare division. Sheff was beforehand head of residence options at Humana Inc. (NYSE: HUM). Vallarino was the CEO of the organizer MyNEXUS.

Enhabit believes that the related nominated board members have 'outdated' and 'poor' expertise.

“Regardless of our demonstrated progress and present trajectory, AREX has initiated a proxy competitors to interchange the vast majority of the Board of Administrators with a slate of seven candidates, largely with outdated expertise and quite a few different shortcomings,” the corporate wrote. “Most strikingly, not one of the six unbiased candidates have any board expertise at a NYSE or NASDAQ listed firm. Moreover, if AREX takes management of the corporate, their acknowledged intention is to ascertain a 'Transformation Committee', which can presumably function as a shadow administration crew, to implement a yet-to-be-announced strategic plan – this isn’t the recipe for achievement.”

Enhabit stated it has labored extensively with AREX Capital, and that the latter has not proven any “willingness to just accept any cheap settlement supply that doesn’t embody offering AREX management over the board.”

At the moment, Enhabit believes that AREX Capital's actions “might destabilize the corporate.”

AREX Capital not too long ago issued related open letters concerning its stake in The ODP Company (Nasdaq: ODP).

Along with concentrating on AREX Capital's board nominees, Enhabit additionally defined the place it had improved in current quarters and why it initially struggled within the public markets.

“AREX's public statements include quite a few mischaracterizations, cherry-picked time durations, and deceptive claims, which we’ll tackle in future communications,” Enhabit wrote. “Nonetheless, we wholeheartedly agree with AREX on the next: 'All that issues now’s placing the corporate on a path that can unlock Enhabit's substantial worth for all shareholders.'”