Providence Services calls Avalon Correctional's section 220 demand 'fishing expedition'

By Lisa Kerner

Charlotte, N.C., Jan. 26 - Providence Service Corp. said it would not be bullied by Avalon Correctional Services, Inc. and its demand to inspect the company's books and records.

The shareholder, under section 220 of Delaware's general corporation law, is seeking access to Providence's shareholder list and to confidential company information covering 20 separate categories, according to a Providence news release.

"Avalon seems to believe that a Section 220 demand right provides them the license to engage in an indiscriminate fishing expedition without the need to provide any credible justification for doing so," Providence chief executive officer Fletcher McCusker said in the release.

McCusker said he believes Avalon is trying to "harass, intimidate and bully" Providence and its board members into complying with Avalon's demand for board seats.

Providence also rejected Avalon's request to engage in a transaction that would effectively "transfer a significant and unjustifiable amount of shareholder value from all of Providence's other shareholders to Avalon."

According to Providence, Avalon and three of its principals have accumulated approximately 19% of the company's common stock at an average price of $1.34 per share and more recently said it may solicit proxies for Providence's next annual meeting and/or solicit consents.

In December, Providence adopted a shareholder rights plan that gives its shareholders rights to purchase shares of newly created series A junior participating preferred stock.

The rights will be triggered if a person becomes the beneficial owner of 20% or more of Providence's outstanding common stock, other than by a "qualified offer," it was previously reported.

Providence's board of directors said it remains focused on delevering the company's debt, growing its core social services business and selling some non-strategic assets.

Oklahoma City-based Avalon owns and operates private community correctional facilities and correctional programming.

Providence is a Tucson, Ariz.-based provider of home- and community-based social services to government-sponsored clients under programs such as welfare, juvenile justice, Medicaid and corrections.

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