Chinese billionaire Tianqiao Chen, who has accumulated a 13.8% stake in troubled Community Health Systems, says he is not interested in controlling the hospital chain and that he has told CHS leadership that many times.
A spokesperson for Chen and his Shanda affiliates told Modern Healthcare Wednesday that Chen wanted to dispel any implication that a stockholder protection rights agreement, or poison pill defense, adopted by CHS' board this week was aimed at Chen.
“We—together with our affiliates—are currently the single-largest shareholder in the company holding approximately 13.8% of its total outstanding common stock,” Chen's Shanda Asset Management Holdings said in a statement to Modern Healthcare Wednesday.
“Given this position, we believe it is important to reiterate our previously stated position of being a passive investor in the company. We have no intention to influence or control the company and have communicated this to the company on various occasions. This position remains unchanged.”
The note was authenticated by Selena Shen, an account director for the San Francisco office of the Brunswick Group, representing the U.S. operations of Chen's Shanda Asset Management Holdings.
The clarification raises the question of why CHS adopted the poison pill. A request for comment was not immediately returned by CHS.
CHS' board adopted the poison pill Monday, saying it wanted to keep a shareholder or group of shareholders from acquiring so much company stock that it would interfere with its efforts to possibly sell the company.
Private equity group Apollo Global Management is reportedly interested in CHS' assets, as are other investors, including real estate investment trusts.
The rights plan is a defensive move that would make it much more expensive for an investor to buy a controlling interest in the company. It would go into effect if any shareholder attempts to acquire more than 15% of the company's shares.
If triggered, common shares would be replaced by rights certificates that would entitle shareholders to purchase fractions of participating preferred stock for $50 per share with the same economic and voting terms of a common share.
If it takes effect, common shares that now cost slightly more than $10 per share on the open market would cost a takeover buyer nearly five times as much to purchase. CHS said the rights plan would be limited to six months, or until April 1, 2017, to give the company an opportunity to find a buyer for the company or blocks of hospitals.
Franklin, Tenn.-based CHS is the nation's second-largest, investor-owned hospital chain with 159 hospitals.
Chen, who made his fortune in online gambling, has been accumulating huge blocks of CHS stock over the past several months. He's been buying shares at about $10 vs. the $40 they traded at a year ago.
In September, he added almost 5.5 million shares and now holds 15.5 million shares or 13.8%.
As he noted in his statement to Modern Healthcare, his regulatory filings showing his large ownership have been classified as Schedule 13G, denoting a passive investment.
He has been bargain hunting since CHS' fortunes took a decided turn last autumn.
The chain is plagued by $15 billion in debt that is far higher than its peers. That's despite raising $1.2 billion earlier this year through a spinoff of 38 small and rural hospitals into Quorum Health Corp., and the $445 million sale of its stake in a four-hospital joint venture in Las Vegas.
CHS is being dragged down by the performance of hospitals acquired in 2014 as part of its blockbuster $7.6 billion purchase of troubled Health Management Associates.
Before HMA was bought by CHS, its management used a similar poison pill to try to fend off activist investor Larry Robbins, who ultimately prevailed and forced the company's sale.