Chemed's Activist Shareholders

Chemed Corporation (CHE - Analyst Report), through its two primary subsidiaries of Vitas and Roto-Rooter, is a major player in both the hospice and plumbing industries, respectively.

On February 12, 2009, MMI Investments, L.P., one of the largest stockholders of CHE with 800,000 shares, or approximately 3.6% of its outstanding common stock, announced that it had sent a letter to the Board of Directors of CHE in which MMI argued that the combination of Roto-Rooter under the same corporate umbrella as Vitas makes little strategic and economic sense and that the two should be separated by means of a tax-free spin-off that would allow shareholders to benefit from each company's value as a separate entity.

CHE recently reported 4Q08 net income of $18.99M (down 6% y/y), or adjusted EPS of $0.93, broadly in line with expectations. Growth of VITAS revenue more than offset the 2.5% y/y decline in Roto Rooter sales for the quarter, which was primarily due to the anticipated fall in demand for discretionary plumbing and drain cleaning services as a result of the economic downturn. We rate the stock a Hold at current levels.

Read the full analyst report on CHE