In a 13D filing on Triad Hospitals Inc. (NYSE:TRI), TPG-Axon Capital Management disclosed a 6.2% stake in the company, noting they changed their filing status from 13G to 13D.
The fund believes the company should take actions to increase shareholder value, including, but not limited to, the following:
1) Significantly reduce capital expenditures and acquisitions
2) Implement rigorous analytical standards for capital expenditures
3) Increase its focus on margins and efficiency of existing assets
4) Significantly increase stock buybacks, in place of risky and unproven gambles on acquisitions and new facility construction
From the 'Purpose of Transaction' section of the filing:
The Shares reported in this Schedule 13D were originally reported by the Reporting Persons on a Schedule 13G that was filed with the Securities and Exchange Commission on June 26, 2006. The Shares were acquired for investment purposes in the ordinary course of business.
The Reporting Persons believe that the Common Stock is significantly undervalued and represents an attractive investment opportunity. The Reporting Persons believe that the Issuer has valuable and well-positioned assets, whose value is significantly greater than the current market capitalization of the company. However, the valuation of the company, and of those assets, is being depressed and diluted by poor capital discipline. The Reporting Persons believe that in order to avoid further dilution of shareholder value, the Issuer must substantially improve its capital discipline and focus on maximizing return on capital.
Since the merger with Quorum Health Group in 2001, the Issuer has spent all available funds on expansion, resulting in negative free cash flow and dilution to shareholders. The Issuer has been unable to analytically demonstrate that this acquisition strategy is in the interest of shareholders, and does not appear to have sufficient focus on calculating return on investment, and ensuring its adequacy. As a result, growth of cash flow, EBITDA and net income, MEASURED ON A PER SHARE BASIS, have significantly lagged behind comparable companies.
The Reporting Persons believe the Issuer should take actions to increase shareholder value, including, but not limited to, the following:
1) significantly reduce capital expenditures and acquisitions;
2) implement rigorous analytical standards for capital expenditures;
3) increase its focus on margins and efficiency of existing assets; and
4) significantly increase stock buybacks, in place of risky and unproven gambles on acquisitions and new facility construction.
The Reporting Persons may engage in discussions and/or take certain actions regarding the foregoing, or any other matters, including, without limitation, the Issuer's operations or business development plans, business strategy, management or directors, governance, capitalization, strategic plans, competitive position, capital structure or capital management policy, with management and the directors of the Issuer, other stockholders, industry analysts, existing or potential strategic partners or competitors, and investment and financing professionals. Such discussions may materially affect, and result in, the Reporting Persons' modifying their ownership of Common Stock. The Reporting Persons reserve the right at any time to reconsider and change their plans or proposals relating to the foregoing.