Lawndale Capital asks National Home Health Care for full and fair auction of company

By Lisa Kerner

Charlotte, N.C., May 9 - National Home Health Care Corp.'s third-largest shareholder, Lawndale Capital Management and its affiliates, with a 7% stake in the company, said it is "time to level the playing field and maximize value for shareholders via a full and fair auction that has still not taken place."

The investors referred to the proposed merger between the company and Angelo Gordon in a letter to National Home Health Care's board of directors and included in a schedule 13D filing with the Securities and Exchange Commission.

"We understand that National Home Health Care's special committee has finally admitted the obvious, and determined that Premier Home Health Care's $12/share bid tied to a lower EBITDA threshold and higher appraisal rights threshold is superior to the Angelo Gordon/Insider group's $11.35 - $11.50/share bid."

Lawndale president Andrew E. Shapiro wrote that if the board had acted properly on behalf of the shareholders, "the company could have attracted a superior agreement and price than the Angelo Gordon/insider buyout."

The investors also cited the merger agreement's no shop/no solicitation clauses, the right for the Angelo Gordon/insider group to knock out alternative bidders by simply matching the alternative bids, and the termination or break-up fee.

Lawndale asked independent directors "to act in a responsible manner, and refuse to enter into any subsequent agreement with the Angelo Gordon/insider Group unless such new agreement eliminates a break-up fee and allows for a reasonable "go-shop" period. The reality here is that this should not be the end of the auction but the beginning."

The investor also urged National Home Health to retain investment bankers to conduct "a full and fair auction" for the company.

"We hope the board will stop putting the interests of the Fialkow family before its duties to the public shareholders," the letter stated.

In February, Lawndale said it believed that some members of the company's board and management may have breached their fiduciary duties by not obtaining the maximum sale price for the company, citing the proxy for the sale of National Home Health Care to management, Eureka Capital Partners and Angelo, Gordon & Co. for $11.35 to $11.50 per share.

On Feb. 14, National Home Health Care received a non-binding proposal from Premier Home Health Care Services, Inc. to acquire all of the outstanding shares of the company for $12.00 per share in cash.

The Scarsdale, N.Y., home health care and staffing services company's stock (Nasdaq: NHHC) closed at $11.82 on Tuesday.

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