CINCINNATI, Mar 16, 2009 (BUSINESS WIRE) -- Chemed Corporation (Chemed) (NYSE:CHE), today announced that it
has responded to the letter sent by MMI Investments, L.P. to the Board
of Directors of Chemed on February 12, 2009.
The Company's response explains that Chemed has carefully considered
MMI's proposal and that the Board of Directors of Chemed continues to
believe that the interests of the Company's stockholders would be best
served by maintaining Chemed's current corporate structure at this time.
Accordingly, Chemed does not currently intend to pursue a separation of
its two businesses, VITAS and Roto-Rooter, as MMI has proposed.
The full text of the letter that Chemed sent to MMI follows:
March 16, 2009
MMI Investments, L.P.
1370 Avenue of the Americas
New York, NY 10019
Attention: Clay Lifflander
Dear Mr. Lifflander:
We welcome MMI's interest in Chemed. Together with our outside advisors,
our Board of Directors has carefully reviewed the structural changes
proposed by MMI and we have determined to leave Chemed's structure
unchanged at this time.
Chemed has a long history of creating value for its stockholders by
prudently managing and monetizing its diverse portfolio of businesses.
The Board has recognized the benefits to Chemed and its stockholders of
strategic divestitures, as evidenced by the Dubois Chemicals, Omnicare,
National Sanitary Supply and Patient Care transactions. The Board's
management has provided stockholders with solid and consistent returns.
Since the announcement of Chemed's acquisition of VITAS in December
2003, Chemed's stock has appreciated over 121%, at a compounded annual
growth rate of over 15%.
As this track record clearly demonstrates, Chemed's Board of Directors
is always willing to make structural changes to advance the interests of
the Company's stockholders. Due to our past success in unlocking value
through spin-offs and other strategic transactions, the Chemed Board
regularly discusses strategic alternatives for VITAS and Roto-Rooter,
including their potential separation. In fact, we began considering this
possibility even prior to completing our acquisition of VITAS.
We agree with the statement in your letter that, "A spin-off of one of
Chemed's businesses would be relatively simple...given Chemed's discrete
operating structure and minimal shared resources;" however it is
important to note that this statement is true only because the Board has
already positioned Chemed's businesses to facilitate such a separation.
Although we firmly believe that our two businesses are currently more
valuable to stockholders together than apart, due to our foresight and
planning, we are well-positioned to separate the businesses if and when
the time is right.
Upon receipt of your letter, the Board worked with our outside financial
advisors, Lazard LLC and J.P. Morgan Securities Inc., and our outside
counsel, Cravath, Swaine & Moore LLP, to refresh our analysis of
Chemed's current structure and to reconsider a potential separation of
the businesses. This recent review reconfirmed that executing a
separation in the current market environment, including the current
state of the equity and credit markets, would be risky and could impair,
rather than create, value for Chemed's current stockholders. Value
creation through a spin-off is dependent on either strong capital
markets with demand for small-cap stocks or a vibrant M&A environment.
Based on our analysis, current stock market valuations and, as you
termed it, the "moribund" state of M&A, we believe that creating two
smaller companies could be value destructive to our stockholders.
In summary, our track record of value-enhancing transactions and our
actions to position VITAS and Roto-Rooter as distinct standalone
entities demonstrates that the Board has long recognized the merits of
the strategy MMI has proposed. We agree that given the proper economic
circumstances a separation could create substantial shareholder value.
However, we firmly believe that now is not the right time to implement
As has been our practice, the Board of Directors of Chemed will continue
to regularly review the benefits and feasibility of strategies designed
to create shareholder value. Once again, thank you for your input and
for your interest in Chemed.
Kevin J. McNamara
Listed on the New York Stock Exchange and headquartered in Cincinnati,
Ohio, Chemed Corporation (www.chemed.com)
operates two wholly owned subsidiaries: VITAS Healthcare and
Roto-Rooter. VITAS is the nation's largest provider of end-of-life
hospice care and Roto-Rooter is the nation's leading provider of
plumbing and drain cleaning services.
Forward Looking Statements
Statements in this press release or in other Chemed communications
may relate to future events or Chemed's future performance. Such
statements are forward-looking statements and are based on present
information Chemed has related to its existing business circumstances. Investors are cautioned that such forward-looking statements are
subject to inherent risk and that actual results may differ materially
from such forward-looking statements. Further, investors are
cautioned that Chemed does not assume any obligation to update
forward-looking statements based on unanticipated events or changed
SOURCE: Chemed Corporation
David P. Williams
Andy Brimmer / Andrew Siegel
Joele Frank, Wilkinson Brimmer Katcher