Shares of troubled Community Health Systems jumped more than 9% in morning trading Monday after hedge fund Camber Capital revealed that it had increased its stake in CHS to 5.5%.
Boston-based Camber and its managing member, Stephen DuBois, earlier this year accumulated a 14.5% stake in Sequenom and pushed operating changes at the patient-management information company until it was sold at a premium price of $371 million to LabCorp.
Camber and DuBois together now own 6.25 million shares of CHS. At the end of June, Camber held about 3%, or 3.5 million shares, of the struggling hospital chain, according to Morningstar.
Camber is the second big bargain hunter to bet on CHS. Chinese billionaire Tianqiao Chen has invested heavily in CHS' depressed stock this year and is its largest shareholder with a 13.8% stake in the company.
Chen and his affiliates from his private investment firm Shanda have said they are not interested in buying CHS. Franklin, Tenn.-based CHS is selling off hospitals and considering selling its entire business to reduce a crushing $15 billion debt.
Camber did not return a phone call seeking comment. A CHS spokeswoman declined to comment.
Last week a Shanda representative declined to say if Shanda had changed its equity position in CHS.
Camber and DuBois Monday filed a 13G statement with the U.S. Securities & Exchange Commission noting that together they had surpassed a 5% stake in CHS that called for the filing. A 13G filing typically notes a passive investment in a company.
As of 11:30 a.m. ET Monday, CHS shares for the day were up 51 cents per share, or 10%, to $6.04.
CHS is working on seven transactions to sell 17 hospitals, its home-care business and other real estate that would raise about $1.2 billion, CEO Wayne Smith said last week during an analyst call to explain additional losses at the company.
The company badly missed analyst expectations in the third quarter with a net loss of $79 million compared with net income of $52 million in the prior-year quarter.
CHS' 159 hospitals also saw admissions during the quarter decline 2% on a same-hospital basis, the company said. CHS is the nation's second-largest investor-owned hospital company.
During his move on Sequenom last spring, DuBois made it clear to management that he considered the company undervalued. DuBois and Camber on that occasion filed a 13D statement that flagged their intention to push changes at the company, including through discussions with management, board members and other investors.
“Such discussions aimed at enhancing shareholder value may concern, among other things, potential business combinations and strategic alternatives, and the business, operations, governance, management, strategy and future plans of the company,” Camber stated in its filing.
Four months later, struggling Sequenom announced that it was being purchased by LabCorp for $2.40 per share, a premium of 182% over the previous day's trading price. Under the deal, LabCorp paid Sequenom shareholders $302 million for the company and assumed another $69 million in debt for a total price of $371 million.
