The settlement of a shareholder lawsuit prompted HCA Holdings to add a member to its board of directors in the past month, while a big stock divestiture caused it to lose another.
HCA, the nation's largest hospital company, announced Monday that Michael Michelson was resigning after serving on the board since 2006.
Michelson, who represented the giant private equity company Kohlberg Kravis Roberts & Co., had to give up the seat after KKR on Monday sold 9.4 million of its HCA shares back to the company for about $750 million.
The buyback reduced KKR's HCA stake to 5.6 million shares and took it below a threshold entitling the firm to a board seat.
KKR was part of a group, including the Thomas Frist family, Bain Capital and Merrill Lynch Global Private Equity, that participated in a leveraged buyout of HCA in 2006 to take the company private. The group then relaunched it as a public company in a 2011 initial public offering.
The $21 billion LBO was one of the largest ever. Michelson was KKR's point person in both the transactions.
HCA today said in a statement that it has no immediate plans to replace Michelson. The board's nominating and corporate governance committee is responsible for identifying candidates. "Through its efforts, we have added eight independent directors over the past five-and-a-half years, including the addition of Mr. Chad Holliday at our annual meeting in April."
Michelson's departure leaves HCA with 11 board members after it was just expanded to 12 in April when shareholders elected Charles “Chad” Holliday Jr. Holliday is board chairman of oil giant Royal Dutch Shell and served as CEO of DuPont from 1998 to 2008.
HCA targeted Holliday for the position and said in its shareholder proxy leading up to last month's annual shareholder meeting that it would not immediately fill the post if Holliday was not elected.
HCA was obligated to add a 12th board member, an independent director, under a $215 million shareholder lawsuit settlement that was finalized last month.
The lawsuit dated to the 2011 IPO. In that class-action lawsuit, HCA shareholders led by the New England Teamsters & Trucking Industry Pension Fund accused the company of not disclosing in its IPO prospectus that falling Medicaid revenue in Florida and Texas along with other items caused HCA's stock to plunge from an offering price of $30 on March 9, 2011, to $18.81 by Oct. 3 that year.
Those shareholders maintained throughout the nearly four-year proceeding that they suffered more than $1 billion in damages from the almost immediate sell-off of outstanding common shares at the time.
HCA denied any wrongdoing in the settlement. But the company said it was settling to put the matter behind it.
HCA last month settled a related “derivative” lawsuit brought by shareholders on behalf of the company against the board members at the time.
It was in that derivative settlement that HCA agreed to add a 12th director to the board who turned out to be Holliday. The settlement also requires other board reforms from HCA in the coming months. Those reforms include limiting HCA directors to one committee chair assignment apiece and preventing them from serving on more than five public corporate boards beyond HCA.
The HCA board also must vet and answer all properly filed shareholder proposals.
