Union Claims Concerns not being Heard in Community Health-Triad Buyout

In its annual meeting today — closed to news media — Community Health Systems sidestepped shareholder concerns regarding its proposed $6.8 billion buyout of Triad Hospitals.

LIUNA — the Laborers’ International Union of North America — attended the meeting to raise concerns about the buyout and about the corporation’s process for considering it.

But the CHS Board of Directors ended the annual meeting after 12 minutes and without addressing the buyout.

LIUNA Director of Corporate Affairs, Richard Metcalf, attended the meeting and delivered a memo to CHS Lead Director Dale Frey. In the memo, Metcalf noted, "the deal has been structured whereby shareholders cannot vote on the transaction, or file appropriate shareholder proposals. Further, we believe that additional information needs to be disclosed," and requested further discussion.

"This is a transaction that will create the largest publicly traded hospital corporation in the U.S., but the CHS board doesn’t see fit to address with shareholders the issues surrounding the transaction," Metcalf said. "CHS shareholders deserve to be heard."

Triad shareholders will have the opportunity to vote on the deal next month. CHS shareholders will have no such voice because CHS is paying cash for Triad.

The union and the Indiana State District Council of Laborers and Hod Carriers Pension Fund, which owns CHS shares, have previously raised concerns that the buyout goes against the company’s investment strategy, dramatically increases the company’s debt and requires a difficult integration of significantly different corporate cultures.

Others, including analysts who cover the hospital industry, have raised similar concerns about the buyout.

For example, Morningstar has reported, "We continue to think Community Health is worth more without" the acquisition and that, "By purchasing Triad, Community’s managers are moving away from what they know best and abandoning an important component of their previous business strategy."