HealthSouth Corp. Chairman Richard Scrushy announced this week the Birmingham, Ala.-based company was suspending its previously announced plan to spin off its surgery center division into a new publicly traded company because of less than ideal market conditions.
"Based on comments we have received from some of our investors and lenders and conditions in the debt and equity markets, we have determined that it does not make economic sense at this time to proceed with a separation transaction," Scrushy said in a written statement.
However, company President and CEO William Owens said HealthSouth would "retain the flexibility to resume the transaction if capital market conditions become more favorable and to consider other strategic alternatives for the surgery center business, if and when that is in the best interests of our stockholders and other constituencies."
HealthSouth again reaffirmed that it was considering the sale of non-core assets and business operations. Any transaction would be contingent upon necessary governmental and third-party approvals and a final OK by HealthSouth's board, company officials said.
Earlier this month, Larry Striplin, a HealthSouth director, stepped down from two board committees -- one of which is investigating shareholder lawsuits, while the other sets Scrushy's salary.
Striplin's company, Nelson-Brantley Glass Contractors, won a $5 million contract to install glass at HealthSouth's new digital hospital being built in Birmingham. Striplin said bad publicity after details of the contract emerged prompted him to resign from both the newly formed special litigation committee and the compensation committee.
Striplin, along with fellow directors Robert May and Jon Hanson, was assigned to examine a string of shareholder lawsuits questioning the board's judgment. Hanson will remain on the special litigation committee, and a replacement for Striplin has not yet been determined, a HealthSouth spokesman said. Striplin will remain on the HealthSouth board, the spokesman added.
In light of recent pending litigation, the board created the special litigation committee to review all matters relevant to the claims. Dozens of new shareholder lawsuits filed since Aug. 28 accuse Scrushy of insider trading. Scrushy has continually said the suits are without merit.