CVS adds four new board members in deal with Glenview as CEO pursues a turnaround

By Sriparna Roy

(Reuters) -CVS Health added Glenview Capital’s top boss and three others to its board in a deal with the hedge fund, a month after the healthcare conglomerate tasked a new CEO with its turnaround efforts.

The company has been facing pressure from investors including Glenview to improve its operations and shareholder value after missing financial targets several times due to increased medical costs in its health insurance business.

Shares of CVS, which also owns a pharmacy benefit manager and one of the largest U.S. retail pharmacy chains, are down about 32% this year. The stock rose 5% to $55.84 in early trading.

Glenview, which had a 0.95% stake as of Sept. 30, said its agreement with CVS included other confidential provisions.

New members who “can bring a fresh set of eyes to the enterprise should be a good thing”, said James Harlow, senior vice president at Novare Capital Management, which owns more than 94,000 CVS shares.

“We see the building blocks coming into place for greater shareholder value creation moving forward,” said Harlow.

AETNA RECOVERY

CVS tapped company veteran David Joyner as CEO in October and earlier this month named former UnitedHealth (NYSE:) insurance head, Steve Nelson, to run the struggling Aetna business.

The healthcare company said Glenview Capital CEO Larry Robbins will join its board along with Leslie Norwalk, Guy Sansone and Doug Shulman. The additions will take the company’s board strength to 16.

The appointments will bulk up the number of healthcare and technology members on the board, which should add comfort to investors regarding Aetna’s recovery pathway, said Evercore analyst Elizabeth Anderson.

Robbins, who had recently met with executives to push for changes, did not call for a breakup of CVS.

Norwalk has previously held positions at the agency that oversees Medicare and Medicaid health insurance programs.

“While having additional expertise…is never a bad thing, we don’t think this really changes anything beyond where we think CVS had already started to point the ship,” said Michael Cherny, analyst at Leerink Partners.

“The CVS story at this juncture is much more about execution the rebuilding/recovery of the HCB business”, referring to the health insurance unit Aetna.