CHEMED CORPORATION FILES DEFINITIVE
PROXY MATERIALS
AND SENDS LETTER TO
STOCKHOLDERS
Urges Stockholders to Vote FOR the
Board’s Nominees on the WHITE Proxy Card Today
CINCINNATI
– April 29, 2009 – Chemed Corporation (NYSE:CHE)
today announced that it has filed with the Securities and Exchange
Commission (the “SEC”) definitive proxy materials in connection with the
Company’s 2009 Annual Meeting of Stockholders, scheduled for May 29, 2009, and
is mailing the following letter to the Company’s stockholders. Chemed
stockholders of record as of March 31, 2009 will be entitled to vote at the
Annual Meeting.
Chemed’s
Board of Directors unanimously recommends that stockholders elect the Board’s
highly qualified nominees by telephone, Internet or by signing, dating and
returning the WHITE proxy card today.
April 29, 2009
IMPORTANT
NOTICE FROM YOUR BOARD OF DIRECTORS
Dear Fellow Stockholders:
Your Board and management team have a
history of taking action to deliver value for stockholders and positioning
Chemed for continued profitability. At Chemed’s upcoming Annual
Meeting, scheduled for May 29, 2009, you will have the opportunity to decide
whether Chemed continues on this path of delivering stockholder value or is
diverted by MMI Investments, L.P. (“MMI”), a dissident hedge fund that has
nominated its own slate of five director candidates to stand for election to
your Board.
It is unfortunate that MMI has chosen
to wage a costly and distracting proxy contest at this year’s Annual
Meeting. We believe that the dissident’s true motivation for
nominating director candidates is to pursue an ill-timed separation of the
Company’s businesses – an irresponsible proposition that could destroy
stockholder value in the current economic environment and is indicative of MMI’s
true, self-serving agenda. We believe MMI and its slate of
director nominees threaten the value of your investment.
Chemed’s Board and management are
confident that the Company is currently on the right path to an even stronger
future and increased value for all Chemed stockholders. To continue
on this path your Board urges
you to support Chemed and vote the WHITE proxy card to elect nine of the current
members of your Board of Directors as well as two new, independent, highly
qualified individuals, Ernest J. Mrozek and Thomas P. Rice.
YOUR
BOARD IS HIGHLY QUALIFIED
AND
COMMITTED TO DELIVERING VALUE TO ALL CHEMED STOCKHOLDERS
Chemed’s Board has a history of success
in unlocking value through spin-offs and other strategic transactions, as
evidenced by the Dubois Chemicals, Omnicare and National Sanitary Supply
transactions1.
The Board also has provided stockholders with solid returns. In fact,
since the announcement of Chemed’s acquisition of VITAS in December 2003,
Chemed’s stock has increased in value by more than 148%, a compounded annual
growth rate of over 18%.
1 These three
transactions, by far the largest effected by Chemed, generated total gross
proceeds of approximately $492 million and resulted in pre-tax gains aggregating
approximately $252 million. Since its formation in 1971, Chemed
effected seven other divestitures that generated gross proceeds of approximately
$219 million and resulted in pre-tax gains of approximately $32
million.
Consistent with our focus on value
creation, your Board and management regularly review the Company’s strategy and
structure. Based on our most recent review, conducted with our
outside financial and legal advisors, we determined that executing the
separation advocated by MMI in the current market environment would be risky and
could impair, rather than create, value for Chemed’s stockholders.
Accordingly, your Board has protected
stockholder value by prudently maintaining Chemed’s current corporate structure
during the global economic downturn while at the same time taking the
appropriate steps to facilitate a separation of Chemed’s businesses – VITAS and
Roto-Rooter – when conditions are right.
CHEMED’S
BOARD NOMINEES ARE THE RIGHT CHOICE
TO
CONTINUE BUILDING VALUE FOR CHEMED STOCKHOLDERS
In response to MMI’s announcement that
it would nominate five candidates for election to the Board at the Annual
Meeting, the Company approached certain of its large stockholders to seek their
input on the composition of the Board and to obtain suggestions for potential
nominees to stand for election as independent directors. One of the
Company’s largest stockholders identified three potential
nominees. One other prospective candidate was identified by each of
an outside advisor to the Company, the Chief Executive Officer of the Company
and the Chairman of the Board, resulting in a total of six
candidates. From these six potential nominees, your Board’s
Nominating Committee recommended, and the Board nominated, Mr. Rice, a candidate
recommended by a large stockholder of the Company, and Mr. Mrozek, the candidate
recommended by the Chief Executive Officer, for election to the Board at the
Annual Meeting. Messrs. Mrozek and Rice
will further enhance the skills and experience of the Board, offer new
perspectives and ideas and continue Chemed’s history of delivering value to its
stockholders.
Prior to his retirement in 2008, Mr.
Mrozek worked with the ServiceMaster Company for over 20 years, serving at
various times as its Vice Chairman and Chief Financial Officer; its President
and Chief Financial Officer; its President and Chief Operating Officer and as a
Group President and Chief Operating Officer. During Mr. Mrozek’s tenure,
ServiceMaster’s businesses included not only its current residential and
commercial cleaning, home warranty and inspection, furniture repair, lawn
service and pest control businesses, but also plumbing and drain cleaning and
home health care and assisted living businesses. Mr. Rice also brings
relevant experience to the Board, having been both a director and executive
officer of several companies in the healthcare industry. Since 1993,
he has served at various times as Chief Executive Officer and a director of
Andrx Corporation; President and Chief Executive Officer and a director of
Chesapeake Biological Laboratories, Inc. and Executive Vice President and Chief
Operating Officer and also as Chief Financial Officer and a director of Circa
Pharmaceuticals, Inc.
Your Board’s nominees, comprised of
nine members of the Chemed Board elected at the 2008 Annual Meeting and two new,
independent director candidates, have the necessary depth and breadth of
relevant expertise in areas that are critical to Chemed’s continued success and
are committed to building value for all Chemed’s stockholders.
Chemed’s
highly qualified nominees are: Joel F. Gemunder, Patrick P. Grace, Thomas C.
Hutton,Walter L. Krebs, Andrea R. Lindell, Kevin J. McNamara, Messrs. Mrozek and
Rice, Donald E. Saunders, George J. Walsh III and Frank E. Wood.
YOUR
BOARD BELIEVES THE DISSIDENT CANDIDATES
HAVE
BEEN NOMINATED ONLY TO ADVANCE MMI’S AGENDA
MMI and its nominees have provided no
new ideas and add minimal relevant experience to improve stockholder
value. Of the dissident’s five nominees:
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Two
have never served on the board of a public
company;
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One
is a professional activist hedge fund
manager;
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Two
others serve as limited partners of the same activist hedge
fund;
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Only
one has any professional experience in healthcare;
and
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Only
one has any professional experience in residential and commercial cleaning
services.
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We do not believe these are the right
candidates to serve on your Board. In our view, MMI and its nominees
would blindly pursue an agenda that could destroy substantial value for Chemed
stockholders. We believe the dissident slate, if
elected, would work only to advance MMI’s interests and not the interests of all
Chemed stockholders.
In contrast to the more than 148%
increase in value your Board has delivered since December 2003, the only three
MMI nominees who have had prior public company board experience have overseen
significant value destruction. Consider, for example, the records of
these MMI nominees:
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Clay B. Lifflander: Mr.
Lifflander has served on the Board of Unisys Corporation (NYSE:UIS) since
May 21, 2008. Since that time the Company’s stock price has
decreased in value by approximately
76%;
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Peter A.
Michel: Mr. Michel has served as President, CEO and
Board Member of iSECUREtrac (OTC BB: ISEC.OB) since August 4,
2006. Since Mr. Michel joined iSECUREtrac the Company’s stock
price has decreased
approximately 71%; and
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Carroll R. Wetzel, Jr.:
Mr. Wetzel served on the Board of The Brink’s Company (NYSE: BCO)
between February 25, 2008 and October 31, 2008. During this
period of time, the Company’s stock price decreased
approximately 29%.
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Chemed’s proven record of successful
spin-offs and other strategic transactions demonstrates that the Board is well
qualified and fully capable of continuing to create value for all Chemed
stockholders. Your Board is engaged, proactive and committed to
delivering further value. We strongly believe that MMI and its
nominees would add nothing to your Board and, if elected, they could impair the
value of your investment by distracting the Board from continuing on its current
path of creating an even stronger future for all of Chemed’s
stockholders.
DON’T
BE MISLED BY MMI’S DELIBERATE FALSITIES
AND
MISCHARACTERIZATIONS
In an effort to further its agenda, the
dissident has put forward misleading information regarding affiliations of
certain of your Board’s directors. Specifically, MMI has attempted to
impugn the integrity and independence of your directors by pointing to
directorships and former employment relationships of certain Board members with
entities that have had ties to Chemed in the past, despite the fact that none of
the independent directors has been an employee or a director of any Chemed
affiliate for a minimum of nearly ten years.
The facts are clear: your Board is in
full compliance with both the spirit and letter of the director-independence
requirements of the New York Stock Exchange and the Securities and Exchange
Commission. Furthermore:
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While
Mr. Gemunder and Ms. Lindell have developed some of their relevant
expertise through their positions with Omnicare, Omnicare became a
publicly owned corporation in 1981 and has not been a Chemed affiliate
since at least 1996;
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DuBois
Chemicals, which employed Mr. Krebs and Mr. Saunders in the 1990s, has not
been a subsidiary of Chemed since
1991;
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Not
only has no Chemed director been an employee or director of Service
America since 1999, but Service America has not even been an affiliate of
Chemed since 2005; and
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Although
Mr. Grace was employed by Grace Logistics and Kascho GmbH from 1988 to
1995, neither of these entities have been Chemed affiliates for at least
25 years.
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Other accusations by MMI are equally
ridiculous. As an example, MMI has questioned the independence of Mr.
Walsh by claiming that the law firm at which he is a partner, Thompson Hine LLP,
has received “significant funding” from Chemed or its affiliates in recent
years. The “significant” payments to which MMI refers consist of a
mere $6,549 in fees since 2007. Further, even if all the payments
made by Chemed to Thompson Hine from 2004 to 2008 are aggregated, the fact is
that Chemed has still paid less than $114,000 in fees to Thompson Hine, an
entity that grossed over $188 million in revenue in 2007
alone. Furthermore, the matter which generated these fees was
originally referred to a Dayton, Ohio, law firm with which Mr. Walsh had no
affiliation. Mr. Walsh was at the time a partner of the New York City
firm of Gould & Wilkie LLP. The Ohio firm representing Chemed
only later merged with Thompson Hine, and only subsequent to that merger did Mr.
Walsh’s own law firm merge with Thompson Hine in 2002. Mr. Walsh had
already served as a director of Chemed for approximately seven years by the time
he became affiliated with Thompson Hine.
MMI’s embellishments and insinuations
extend to its comments about your management’s views on a potential separation
of Chemed’s businesses. MMI has consistently alleged that the views
of Chemed’s management with respect to a potential spin-off have been “shifting”
and have “veered significantly” since 2004. The reality, however, is
that your management team’s position has been entirely consistent. In
2004, Chemed believed a separation was inevitable because it anticipated that
its stock price would not reflect the value of the two distinct
segments. As recently as the January 13, 2009 JPMorgan Healthcare
Conference, Mr. McNamara reiterated this sentiment, and stated that Chemed would
consider a separation transaction if and when it believed your company’s stock
price reflected such a discount. Your Board and management have not
only been consistent in their views with respect to a spin-off, but they
continue to act deliberately and carefully to maximize the value of your
shares. In addition, your management has consistently expressed its
views that the combined cash flow of the businesses is an advantage for both
segments. Your Board and management are greatly concerned about MMI’s
failure to focus on this synergy in light of the existing economic
climate.
Unfortunately, MMI’s
mischaracterizations regarding a potential spin-off go beyond remarks about the
consistency of your management’s position. MMI is also attempting to
frighten you into believing that Chemed will not be prepared for a spin-off if
and when the time is right. Not only have your Board and management
already positioned Chemed to separate its two distinct businesses when the time
is right, but they have also confirmed with the Company’s financial advisors
that a spin-off of this nature can typically be completed in less than half the
time claimed by MMI. Furthermore, MMI ignores the fact that Chemed
previously took Roto-Rooter public in 1985, where it traded on NASDAQ until
1996, when Chemed repurchased the Roto-Rooter shares due to the low valuation
the market placed on Roto-Rooter as a stand alone, micro-cap
entity.
MMI has also distorted the facts
regarding its investment in Chemed. In its attempts to persuade you
that its interests are aligned with those of our long-term stockholders, MMI has
falsely stated that it has held Chemed stock for over two years. The
reality is that MMI did not make its first purchase of Chemed stock until
November 30, 2007, less than 17 months ago, and sold all of its shares only 18
days later. MMI then ceased to have any investment in Chemed until
March 2008 and, accordingly, has only been a Chemed stockholder for 13
months. Furthermore, MMI’s sales of over 22% of its Chemed holdings
in December 2008 call into question its asserted intention to remain an investor
in Chemed.
We believe that MMI’s record of
mischaracterizations and deceit provides even more reason to reject the
dissident’s nominees and vote the WHITE proxy card. We urge you to
consider the two most important relevant facts about the Chemed
Board:
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We
have always acted in the best interests of Chemed’s stockholders,
demonstrated powerfully by the over 18% compounded annual growth in your
stock since 2003; and
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Now
is not
the right time, in light of market conditions, to separate the Company’s
businesses.
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CHEMED’S
BOARD NOMINEES ARE THE RIGHT CHOICE
With track records of successfully
creating value for stockholders and expertise that is critical to Chemed’s
future success, Chemed’s Board nominees are the right choice to continue
building value for all stockholders. We urge you to protect your
investment and not to risk your Company’s future and prospects. Your Board strongly
recommends that all Chemed stockholders vote FOR Chemed’s director nominees on
the WHITE proxy card and discard the dissident’s proxy
materials.
VOTE
FOR YOUR
BOARD’S NOMINEES ON THE WHITE PROXY CARD
TODAY
Your vote is important, no matter how
many or how few shares you own. If you have any questions or need any
assistance voting your shares, please do not hesitate to contact our proxy
solicitor, Innisfree M&A Incorporated, by calling toll-free at
877-825-8631.
On behalf
of the Board of Directors, we thank you for your continued support.
Sincerely,
/s/ Kevin J.
McNamara |
/s/ George J. Walsh
III |
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Kevin J.
McNamara |
George J. Walsh
III |
Chief Executive
Officer |
Chairman of the
Board |
Your
Vote Is Important, No Matter How Many Or How Few Shares You
Own.
If
you have questions about how to vote your shares, or need additional
assistance, please contact the firm assisting us in the solicitation of
proxies:
INNISFREE
M&A INCORPORATED
Stockholders
Call Toll-Free: (877) 825-8631
Banks
and Brokers Call Collect: (212) 750-5833
IMPORTANT
We
urge you NOT to sign any Gold proxy card sent to you by MMI.
If
you have already done so, you have every legal right to change your vote
by using the enclosed WHITE proxy card to vote
TODAY—by
telephone,
by
Internet, or by signing, dating and returning the WHITE proxy
card
in
the postage-paid envelope provided.
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Cravath,
Swaine & Moore LLP is acting as legal advisor to Chemed and Lazard Frères & Co. LLC and
J.P. Morgan Securities Inc. are acting as financial advisors.
About Chemed
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 expectations.
Important Information
Chemed filed
with the
SEC, on April 29, 2009, a definitive proxy
statement in connection with its 2009 annual meeting, and is mailing the
definitive proxy statement to its stockholders. Investors and security
holders are urged to read the definitive proxy statement relating to the 2009
Annual Meeting and any other relevant documents filed with the SEC (when
available)
because they contain important
information. Investors and security holders may obtain a free copy of
the
definitive
proxy statement and other documents that
Chemed files with the SEC (when
available)
at the SEC’s website at
www.sec.gov and Chemed’s website at
www.chemed.com. In addition, the definitive proxy statement and
other documents filed by Chemed with the SEC
(when
available) may be obtained from
Chemed free of charge by directing a request to Chemed Corporation, Attn:
Investor Relations, Chemed Corporation, 2600 Chemed Center, 255 East Fifth
Street, Cincinnati, OH 45202-4726.
Certain Information Regarding
Participants
Chemed, its directors and
certain executive officers and employees are participants in the
solicitation of Chemed’s security holders in
connection with its 2009 Annual Meeting. Security holders may obtain information
regarding the names, affiliations and
interests of such individuals in Chemed’s Annual Report on
Form 10-K for the year ended December 31, 2008, which was filed
with the SEC on February 27, 2009, and its definitive proxy
statement for the 2009 Annual Meeting, which
was
filed with
the SEC on April 29, 2009. To the extent
holdings of Chemed securities have changed since the amounts printed in the
definitive
proxy statement for the 2009 Annual Meeting, such
changes have been or will be reflected on Statements of Change in
Ownership
on Form 4 filed with the SEC. These documents may be obtained free of charge
(when
available) from the
SEC’s website at
www.sec.gov and Chemed’s website at
www.chemed.com.
Contacts
David
P. Williams
Chemed
Corporation
513-762-6901
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Andy Brimmer / Andrew
Siegel
Joele Frank, Wilkinson Brimmer
Katcher
212-355-4449
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