DALLAS (CN) – Jeb Bush is the lead defendant in a Tenet Healthcare shareholders derivative complaint. The class representative, a union pension fund, claims Bush and Tenet’s other board members fought off a merger offer from Community Health Services by changing company bylaws, adopting a poison pill under the pretext of protecting an alleged “tax asset” – an operating loss, to entrench themselves in their positions at shareholders’ expense. Bush was paid $245,000 for sitting on the board in 2009.
Community Health Services offered to buy up all Tenet shares in a stock and cash deal valued at $6 per share – a 40 percent premium over Tenet’s price on the day of the announcement.
Tenet rejected the offer “without any negotiation or due diligence,” according to the complaint in Dallas County Court. The directors also “adopted a ‘poison pill’ (with a 4.9 percent ownership trigger) under the pretext of protecting an alleged tax asset (net operating loss carryforwards). As a consequence of the minimal threshold triggering the pill, the pill is preclusive in that it makes it virtually impossible for an acquitting company to wage a successful proxy contest,” according to the lead plaintiff, the Indiana Electrical Workers Pension Trust Fund IBEW.
The pension fund says that the defendant directors also changed Tenet’s bylaws, “removing annual meeting timing requirements,” to delay the shareholders meeting by 6 months, “in the hopes that CHS’s interest in Tenet will have waned by the time the annual meeting is eventually held and the incumbent directors will be able to run unopposed. Indeed, at the annual meeting, all director defendants are up for re-election.”
The shareholders say the defendants breached their fiduciary duty, to entrench themselves in office. They seek class certification and a hearing on the merits for an injunction to rescind the poison pill, enjoin the defendants “from implementing any coercive or preclusive defensive measures that would have the effect of impeding or frustrating proper consideration, in good faith, of the CHS offer or any competing offer,” and they want the delay of the shareholders meeting rescinded.
Nine other Tenet board members are named as defendants with Bush.
Plaintiffs are represented by Joe Kendall.