Financial Times - April 7, 2000
Aetna investors demand share rise in 90 days By Adrian Michaels in New York
A group of powerful shareholders in Aetna Thursday demanded that the board of the US's largest health insurer take action within 90 days to improve the share price.
The group, brought together by broker-dealer Providence Capital, which owns shares in Aetna through two affiliates, poured scorn on the insurer's current plan to split in two along healthcare and financial services lines.
"The plan is too back-end loaded," said Herbert Denton, president of Providence Capital, referring to Aetna's timetable to split only by the end of the year. It is, however, looking to dispose of $500m-$1.5bn of non-core overseas assets before then.
Mr Denton said that did not seem enough to raise the share price. "The shareholders are interested in more of the value coming out now," he said.
Aetna last month rejected a $10.4bn takeover offer from Dutch financial services group ING and Californian health insurer WellPoint.
The insurer said the offer - equivalent to about $70 an Aetna share - understated significantly the value of the company.
The group of shareholders - representing about 25 institutions and 30-40 per cent of Aetna's shares - agreed that $70 was a low valuation.
But it pointed out that before the bid, Aetna's share price was about $40, the same as it was 17 years ago.
Mr Denton said it was up to William Donaldson, Aetna's new chief executive, to decide what steps to take quickly to increase the price, which was $56 3/4 at yesterday's close.
"There should be clarity and activity over the next 90 days. . .he's the one who said $70 was totally inadequate. Do something about it."
Mr Denton said possibilities included a large share buy-back or disposals of some core assets. "The shareholders will encourage management to take decisive steps now to deliver value in the marketplace," he said.
The group applauded Aetna's stance that it was still willing to consider "reasonable" takeover offers.
On Thursday Aetna announced that it had started searching for a chief executive to head its healthcare business when it is split off. "Our goal is to bring in the new health CEO as soon as possible, certainly well before the company becomes independent," Mr Donaldson said. Aetna could not be reached for comment on the shareholder meeting.
Aetna has its annual meeting on April 28. "We're going to have a very high-minded, well-intentioned discussion," Mr Denton said.