The fate of Coastal Physician Group hangs on a proxy fight that will be resolved this week.
The company's founder and former chief executive officer, Steven M. Scott, M.D., is contesting management's slate of directors.
Scott, who owns 30% of Coastal, was removed as CEO last May 29. The company has been losing money and is trying to shed assets and concentrate on its core business until it turns around.
"I believe we should sell the company now," Scott said. "I don't think Wall Street believes in the turnaround strategy."
The other 70% of shareholders' views will not be known for two weeks or so. Although the annual meeting takes place Sept. 27 in Durham, N.C., where the company is based, about five business days will be needed for a proxy judge to count the ballots.
"I think there's more than a realistic chance it could go my way," Scott said.
In a Sept. 13 letter from board Chairman Jacque J. Sokolov, M.D., and President and CEO Joseph G. Piemont, the company asks shareholders to "reject Dr. Scott and his nominees" and to follow through on a "comprehensive business plan" orchestrated by Price Waterhouse.
The physician management and contract physician services company has seen its fortunes decline since it embarked on an acquisition binge in 1993. It lost $47 million in 1995.
Coastal is considering several options for its future, said Robert P. Borchert, senior vice president for investor relations. They include:
Selling the entire company to a financial or strategic buyer.
Refocusing the company on its core operations.
Divesting nonstrategic assets and paying down debt.
Scott, who still serves on the nine-member board, was placed on "sabbatical leave" as CEO after other directors decided he was hindering implementation of the recovery plan. He still collects salary of $333,333 a year. The value of his holdings, however, plummeted from a peak of $288 million to $29 million at its lowest point but recovered to $44 million as of last week.
Coastal maintains that Scott's strategy will not return the company to viability.
"We believe we have the right plan," Borchert said. "Just putting the company up for sale will immediately deteriorate the value of the organization, as opposed to continuing to implement the plan."
Scott said that strategy is flawed because the outlook for emergency department contracting, Coastal's core business, is poor. The pool of hospital clients is declining, and managed care is forcing down emergency room use.
Scott vigorously denied reports that he wants to return as CEO. "I'm an entrepreneur; I'll go build another company. But I'm not an operator."