Extendicare Investor Oxford Park to Nominate Seven Directors

  • Toronto-based fund says U.S. sales proceeds are misused
  • Oxford Park to nominate Frederic Waks as board chairman

Oxford Park Group, a Canadian investment fund, has called for a special meeting at Extendicare Inc., where it intends to nominate seven directors in a push for changes at the senior-care provider.

Oxford Park said in a statement Monday it will nominate Trinity Development Group Inc. Chief Executive Officer and former RioCan Real Estate Investment Trust executive Frederic Waks to the board and for the chairman role. The other nominees include Derek Watchorn, Salim Manji, Gail Paech, Alan Hibben, Graham Savage, and Michael Brown.

Shares in Extendicare rose 4.75 percent to C$9.26 Monday in Toronto trading, giving the company a market value of C$812 million ($609 million).

Oxford argues Extendicare needs a change in leadership to focus its capital investments on acquisitions that will generate positive cash flow. It’s also urging the company to increase its share buyback program, improve its cost structure, and overhaul its board compensation.

The Toronto-based fund, is run by former Canaccord Genuity investment banker Phil Evershed, is Extendicare’s largest shareholder with 5 percent of the company’s outstanding shares.

The push for change at the company comes even after a 36 percent increase in Extendicare’s share price this year prior to Monday’s close, and the company noted the S&P/TSX has fallen roughly 8.5 percent over the same period.

Analyst Targets

Extendicare said in a statement it has communicated with Oxford Park since the investor announced its position. The company outlined its strategy to Oxford Park to generate and grow shareholder value “by delivering care across the health-care continuum to meet the needs of a growing seniors’ population across Canada,” according to the statement.

“Over the past number of months, analysts who cover Extendicare have increased their target prices on a number of occasions,” the company said. “This is indicative of the success of Extendicare’s strategy, and management remains focused on executing on its plan and driving further, sustainable value creation for all Extendicare shareholders.”

Oxford Park is taking issue with the company’s use of proceeds from the sale of Extendicare’s U.S. business in July. The firm said it is concerned about purchases of retirement homes in Ontario and Saskatchewan.

It said the purchases “together with the three retirement development projects under way, validates our concern that the direction of the company is not consistent with the interests of its shareholders.”

Oxford Park announced its ownership stake in Extendicare in July, and reached out in an effort to work with the company, including providing input on investment decisions. It says it has been excluded in these decisions since then, and has been asked to mail in its views.

At the time Oxford announced its position in Markham, Ontario-based Extendicare, the company said it planned to invest the proceeds from the sale by essentially doubling the home health-care business through the acquisition of competitors.

Oxford Park argues Extendicare has limited experience in running retirement homes, has depleted almost all of the U.S. sales proceeds with its recent purchases, and materially affected the risk to the company because the development properties won’t generate meaningful cash flow for two to three years.

“Over the past seven years, Extendicare has underperformed its peer group, reduced dividends, exhibited weak operational performance and invested the company’s capital with little regard for shareholder interests,” Oxford Park said.

Waks said the new board would manage capital more thoughtfully and will strive to transform Extendicare into the premier senior-care provider in Canada.

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