Tenet Healthcare Corporation · NYSE:THC
Tenet Healthcare — Proxy Contest (February 2018)
27 slides from Tenet Healthcare's proxy contest presentation, Feb 2, 2018
Slide 1: The Case for Tenet to Adopt Action by Written Consent
THE CASE FOR TENET TO ADOPT ACTION BY WRITTEN CONSENT PRESENTATION TO TENET SHAREHOLDERS FEBRUARY 2018
Slide 2: Situation Background
SITUATION BACKGROUND Our firm, Glenview Capital Management (“Glenview”), has been a shareholder of Tenet Healthcare Corporation (“Tenet” or the “Company”) for six years, and presently we own 17.8% of the Company Today we submitted a formal proposal, to be voted on by all shareholders, for Tenet to a
Slide 3: Why Action by Written Consent Is Necessary
WHY ACTION BY WRITTEN CONSENT IS NECESSARY 1 Tenet has been a chronically underperforming company for decades 2 The Board of Tenet has been slow to respond independently to challenges in multiple instances, and in fact has pursued strategies that result in Board and Management entrenchment, furtheri
Slide 4: Glenview Supports Several Recent Tenet Pledges and Actions
GLENVIEW SUPPORTS SEVERAL RECENT TENET PLEDGES AND ACTIONS In order to avoid any confusion in the marketplace, Glenview wishes to make clear that we support many recent pledges and actions initiated since the recent CEO transition in October 2017, including: 1. A greatly intensified focus on patient
Slide 5: Why Action by Written Consent Is Necessary
WHY ACTION BY WRITTEN CONSENT IS NECESSARY 1 Tenet has been a chronically underperforming company for decades 2 The Board of Tenet has been slow to respond independently to challenges in multiple instances, and in fact has pursued strategies that result in Board and Management entrenchment, furtheri
Slide 6: Underperformance Over Decades
UNDERPERFORMANCE OVER DECADES Tenet’s stock has performed quite poorly over a 1, 3, 5, 10 and 30 year basis versus the broader markets and an index of comparable medical facilities companies 1 Healthcare Period Dates S&P 2, 3 Facilities Index 1 year 1/31/17 – 1/31/18 7% 26% 21% 3 year 1/30/15 – 1/31
Slide 7: Underperformance Post-Large Acquisitions
UNDERPERFORMANCE POST-LARGE ACQUISITIONS Whether due to the prices paid or integration issues, contrary to Tenet management’s assertions and Board expectations, growth through meaningful acquisition has destroyed rather than created shareholder value as measured by the stock performance compared to
Slide 8: Positive Performance Since Recent Board and Management Changes
POSITIVE PERFORMANCE SINCE RECENT BOARD AND MANAGEMENT CHANGES On August 17th 2017, Glenview resigned its two Board seats in order to speak directly to shareholders in opposition to the Board’s views 15 days later per the terms of its Standstill Agreement. Since then, Tenet’s CEO was ultimately repl
Slide 9: Consistent Track Record of Earnings Underperformance
CONSISTENT TRACK RECORD OF EARNINGS UNDERPERFORMANCE We believe Tenet’s underperformance over the past 10 years reflects the legacy CEO and Board’s combined focus on aggregate acquisition driven growth at the expense of per share value creation Adj. EBITDA 1, 3 Adj. EPS 2, 3 2007A thru 2017E Total G
Slide 10: Consistent Track Record of Credit Underperformance
CONSISTENT TRACK RECORD OF CREDIT UNDERPERFORMANCE We believe Tenet’s underperformance over the past 10 years reflects the legacy CEO and Board’s combined focus on aggregate acquisition driven growth at the expense of credit quality Net Debt Net Leverage Only $0.5B or ~5% of the >$10B increase in Te
Slide 11: Poor Governance Has Led to Government Oversight, Again
POOR GOVERNANCE HAS LED TO GOVERNMENT OVERSIGHT, AGAIN The US Government has repeatedly imposed long-term oversight of Tenet facilities spanning multiple management and board regimes and imposed fines of ~$1.8B, similar to the market equity capitalization of the Company 1 Government Investigation Re
Slide 12: Why Action by Written Consent Is Necessary
WHY ACTION BY WRITTEN CONSENT IS NECESSARY 1 Tenet has been a chronically underperforming company for decades 2 The Board of Tenet has been slow to respond independently to challenges in multiple instances, and in fact has pursued strategies that result in Board and Management entrenchment, furtheri
Slide 13: Shareholder-Unfriendly Board Actions: Annual Meeting
SHAREHOLDER-UNFRIENDLY BOARD ACTIONS: ANNUAL MEETING Tenet’s Board, which includes many legacy members, has a history of policies that appear to enable entrenchment over progress Tenet Historical Annual Tenet delayed its 2011 annual shareholder meeting by six months as it sought Meeting Dates to fen
Slide 14: Shareholder-Unfriendly Board Actions: 2017 Poison Pill
SHAREHOLDER-UNFRIENDLY BOARD ACTIONS: 2017 POISON PILL Tenet has twice this decade adopted a poison pill, recently citing tax attributes as the primary motivation, despite the fact that such tax attributes have been present for the last twelve years The Board adopted a poison pill in August 2017 in
Slide 15: Static Board Before Glenview Involvement
STATIC BOARD BEFORE GLENVIEW INVOLVEMENT Until Glenview’s increased involvement in early 2016, the Tenet Board was static and slow to attract fresh ideas and independent perspectives Tenet Board Composition as of January 19, 2016 Pre-Glenview Board Appointments Appointment Date through 1/19/2016 1 I
Slide 16: Glenview Attempts at Constructive Input
GLENVIEW ATTEMPTS AT CONSTRUCTIVE INPUT Glenview made multiple attempts to constructively Despite over five years of intense, collaborative and collaboratively engage the Tenet Board, sharing its engagement with the company, through August 2017, perspectives on the company and thoughts on value virt
Slide 17: Glenview Attempts at Constructive Input
GLENVIEW ATTEMPTS AT CONSTRUCTIVE INPUT Glenview Results Leading to Glenview “Irreconcilable Differences” Recommendations 1 Strengthen Quality Slow progress CMS stars below national average 2 Vanguard missed public guidance, elevating net debt/EBITDA to >6x post-acquisition Repurchase Over USPI intr
Slide 18: Why Action by Written Consent Is Necessary
WHY ACTION BY WRITTEN CONSENT IS NECESSARY 1 Tenet has been a chronically underperforming company for decades 2 The Board of Tenet has been slow to respond independently to challenges in multiple instances, and in fact has pursued strategies that result in Board and Management entrenchment, furtheri
Slide 19: Action by Written Consent Is Common and Appropriate
ACTION BY WRITTEN CONSENT IS COMMON AND APPROPRIATE The right to reconstruct the Board through Action by Written Consent is reasonable, common and we believe highly appropriate for a Company with Tenet’s history Similar action by written consent rights are present in 30% of S&P 500 companies and 64%
Slide 20: The Right of Action by Written Consent Is Common
THE RIGHT OF ACTION BY WRITTEN CONSENT IS COMMON % of Companies with Action by Written Consent 75% 64% While we cannot be certain, we believe that because Nevada offers fewer shareholder protections than 50% other popular states of incorporation (such as Delaware), owners and 33% responsible directo
Slide 21: Tenet Special Meeting Amendment Is Impractical and Off-Market
TENET SPECIAL MEETING AMENDMENT IS IMPRACTICAL AND OFF-MARKET The Special Meeting Right by Tenet Market Standards 50.1% of shareholders are needed to call a special 10% Threshold meeting (per ISS published guidelines) Shareholders must hold their shares continuously from time of the Special Meeting
Slide 22: Why Action by Written Consent Is Necessary
WHY ACTION BY WRITTEN CONSENT IS NECESSARY 1 Tenet has been a chronically underperforming company for decades 2 The Board of Tenet has been slow to respond independently to challenges in multiple instances, and in fact has pursued strategies that result in Board and Management entrenchment, furtheri
Slide 23: Glenview's History with Action by Written Consent
GLENVIEW’S HISTORY WITH ACTION BY WRITTEN CONSENT Action by Written Consent is infrequently used – in fact, from 2015 to 2017 there are no examples of Action by Written Consent involving S&P 500 companies 1 June 2013: Glenview launched an Action by Written Consent campaign, as permitted under the HM
Slide 24: Final Remarks
FINAL REMARKS PAGE 23
Slide 25: Clarification on Prior Glenview Recommendations
CLARIFICATION ON PRIOR GLENVIEW RECOMMENDATIONS To keep our fellow shareholders fully informed, we present a history of our recommendations made privately to the Company and our views on key issues currently facing Tenet These matters are not subject to a shareholder vote but we believe are worthy o
Slide 26: Singular Issue Vote
SINGULAR ISSUE VOTE Glenview is neither proposing an alternate slate of Directors at the upcoming annual meeting nor asking for any shareholder vote on strategy or direction The vote is on the singular issue of providing shareholders the ability to trust but verify – by having a reasonable method to
Slide 27: Disclaimer
DISCLAIMER SECURITY HOLDERS ARE ADVISED TO READ THE PROXY STATEMENT AND OTHER DOCUMENTS RELATED TO THE SOLICITATION OF PROXIES BY GLENVIEW CAPITAL PARTNERS, L.P., GLENVIEW INSTITUTIONAL PARTNERS, L.P., GLENVIEW CAPITAL MASTER FUND, LTD., GLENVIEW CAPITAL OPPORTUNITY FUND, L.P., GLENVIEW OFFSHORE OPP