<SEC-DOCUMENT>0000921895-24-001463.txt : 20240626
<SEC-HEADER>0000921895-24-001463.hdr.sgml : 20240626
<ACCEPTANCE-DATETIME>20240626165549
ACCESSION NUMBER:		0000921895-24-001463
CONFORMED SUBMISSION TYPE:	DFAN14A
PUBLIC DOCUMENT COUNT:		1
FILED AS OF DATE:		20240626
DATE AS OF CHANGE:		20240626

SUBJECT COMPANY:	

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			Enhabit, Inc.
		CENTRAL INDEX KEY:			0001803737
		STANDARD INDUSTRIAL CLASSIFICATION:	SERVICES-HOME HEALTH CARE SERVICES [8082]
		ORGANIZATION NAME:           	08 Industrial Applications and Services
		IRS NUMBER:				472409192
		STATE OF INCORPORATION:			DE
		FISCAL YEAR END:			1231

	FILING VALUES:
		FORM TYPE:		DFAN14A
		SEC ACT:		1934 Act
		SEC FILE NUMBER:	001-41406
		FILM NUMBER:		241074320

	BUSINESS ADDRESS:	
		STREET 1:		6688 N. CENTRAL EXPRESSWAY, SUITE 1300
		CITY:			DALLAS
		STATE:			TX
		ZIP:			75206
		BUSINESS PHONE:		4696216419

	MAIL ADDRESS:	
		STREET 1:		6688 N. CENTRAL EXPRESSWAY, SUITE 1300
		CITY:			DALLAS
		STATE:			TX
		ZIP:			75206

	FORMER COMPANY:	
		FORMER CONFORMED NAME:	Encompass Health Home Health Holdings, Inc.
		DATE OF NAME CHANGE:	20200218

FILED BY:		

	COMPANY DATA:	
		COMPANY CONFORMED NAME:			AREX Capital Management, LP
		CENTRAL INDEX KEY:			0001800261
		ORGANIZATION NAME:           	
		IRS NUMBER:				815477716
		STATE OF INCORPORATION:			DE

	FILING VALUES:
		FORM TYPE:		DFAN14A

	BUSINESS ADDRESS:	
		STREET 1:		10 EAST 53RD STREET
		STREET 2:		11TH FLOOR
		CITY:			NEW YORK
		STATE:			NY
		ZIP:			10022
		BUSINESS PHONE:		646-679-4000

	MAIL ADDRESS:	
		STREET 1:		10 EAST 53RD STREET
		STREET 2:		11TH FLOOR
		CITY:			NEW YORK
		STATE:			NY
		ZIP:			10022
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">(Amendment No. )</P>

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<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">&#9744;</TD><TD>Preliminary Proxy Statement</TD></TR></TABLE>

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<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top"><TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">&#9744;</TD><TD>Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))</TD></TR></TABLE>



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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 0"><TR STYLE="vertical-align: top"><TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.5in">&#9746;</TD><TD>Definitive Additional Materials</TD></TR></TABLE>



<P STYLE="margin-top: 0; margin-bottom: 0">&nbsp;</P>

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    <TD STYLE="width: 100%; text-align: center; vertical-align: top; border-bottom: Black 0.5pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">ENHABIT, INC.</P>
</TD></TR>
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    <TD STYLE="text-align: center; vertical-align: top"><P>(Name of Registrant as Specified In Its Charter)</P>

</TD></TR>
<TR STYLE="vertical-align: top; text-align: left">
    <TD>&nbsp;</TD></TR>
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    <TD STYLE="text-align: center; vertical-align: top; border-bottom: Black 0.5pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">AREX CAPITAL MASTER FUND, LP</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">AREX CAPITAL PARTNERS, LP</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">AREX CAPITAL, LTD.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">AREX CAPITAL GP, LLC</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">AREX CAPITAL MANAGEMENT, LP</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">AREX CAPITAL MANAGEMENT GP, LLC</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">ANDREW RECHTSCHAFFEN</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">JAMES T. CORCORAN</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">MEGAN AMBERS</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">MAXINE HOCHHAUSER</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">MARK W. OHLENDORF</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">ANNA-GENE O&rsquo;NEAL</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">DR. GREGORY S. SHEFF</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0; text-align: center">JUAN VALLARINO</P>
</TD></TR>
<TR STYLE="vertical-align: top; text-align: left">
    <TD STYLE="text-align: center; vertical-align: top"><P>(Name of Persons(s) Filing Proxy Statement, if other than the Registrant)</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: justify; text-indent: 0.5in">AREX Capital Master Fund,
LP, an exempted limited partnership organized under the laws of the Cayman Islands, together with the other participants named herein
(collectively, &ldquo;AREX&rdquo;), has filed a definitive proxy statement and accompanying WHITE universal proxy card with the Securities
and Exchange Commission (&ldquo;SEC&rdquo;) to be used to solicit votes for the election of its slate of highly-qualified director nominees
at the 2024 annual meeting of stockholders (the &ldquo;Annual Meeting&rdquo;) of Enhabit, Inc., a Delaware corporation (the &ldquo;Company&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: justify; text-indent: 0.5in">On June 26, 2024, Andrew
Rechtschaffen, the Managing Member of the general partner of AREX Capital Master Fund, LP, was quoted in the following article published
by The Deal:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-indent: 0.5in"><B>Arex&rsquo;s Enhabit Battle Moves Past Failed
Auction</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-indent: 0.5in">By Ronald Orol &mdash;
June 26, 2024 12:34 PM</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: justify; text-indent: 0.5in"><I>The insurgent investor
and home health and hospice company are battling over director qualifications, with board and industry experience coming under scrutiny.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: justify; text-indent: 0.5in">In May, activist Arex Capital
Management LP launched a change-of-control director contest at Enhabit Inc. (EHAB), after the home health and hospice care company concluded
a strategic review process without a sale.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: justify; text-indent: 0.5in">The insurgent fund nominated
seven candidates for Enhabit&rsquo;s then 13-person board, after expressing disappointment that the auction ended with no deal. The &ldquo;failure,&rdquo;
as the insurgent described the auction&rsquo;s conclusion, didn&rsquo;t reflect Enhabit&rsquo;s &ldquo;strategic potential&rdquo; but
rather lay with the company&rsquo;s board.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: justify; text-indent: 0.5in">&ldquo;If this company
is going to be independent, it needs directors who can help guide it much more effectively than before,&rdquo; Arex managing partner Andrew
Rechtschaffen said. &ldquo;You can&rsquo;t just have the same team oversee management. Industry expertise is vital.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: justify; text-indent: 0.5in">Enhabit&rsquo;s shares
are down 29% over the past year and 66% since it spun off from Encompass Health Corp. (EHC) in July 2022, and traded midday Wednesday,
June 26, at $8.49 a share. Last month, the home health company missed revenue and income expectations for the first quarter, the same
day it concluded the review with no sale.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: justify; text-indent: 0.5in">In its initial brush with
activism, the business spun off from Encompass Health under pressure from Barry Rosenstein&rsquo;s Jana Partners LLC, and a settlement
with two other activists came last year.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: justify; text-indent: 0.5in">The latest pressure led
Enhabit in May to report more details about its auction &mdash; it said that, with the help of financial adviser Goldman, Sachs &amp;
Co. and legal adviser Sidley Austin LLP, it spent nine months reviewing strategic options, involving 38 potential counterparties, of which
26 executed nondisclosure agreements and nine participated in management presentations. Ultimately, two sponsors and two strategics provided
initial indications of interest, but none submitted offers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: justify; text-indent: 0.5in">&ldquo;Significant headwinds&rdquo;
affected the review, including changes in Medicare Advantage rates, the antitrust landscape and persistent high interest rates, the company
said.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: justify; text-indent: 0.5in">Company followers interviewed
by The Deal, however, said Enhabit has continued to underperform peers in recent months, while one sell-side analyst also expressed surprise
a buyer wasn&rsquo;t found. Healthcare insurers, such as Humana Inc. (HUM), and other companies, including Addus HomeCare Corp. (ADUS)
and BrightSpring Health Services Inc. (BTSG), could be attracted to Enhabit&rsquo;s business, the analyst added, as could private equity.
Addus suggested at an investor conference it could be interested in Enhabit, but no bid emerged, the company follower said. Addus declined
to comment.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: justify; text-indent: 0.5in">A recent BrightSpot acquisition
of a hospice and palliative care provider represents evidence that it&rsquo;s committed to executing on its acquisition strategy, Jefferies
LLC analysts said Monday. Another company, Texas-based home health and hospice company VitalCaring Group, might be attracted as well,
with backing, the analyst said. The company&rsquo;s CEO, April Anthony, who founded Encompass&rsquo; home health and hospice division
and left in 2021, told Hospice News in March, &ldquo;We absolutely intend to be very active in the M&amp;A space.&rdquo;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: justify; text-indent: 0.5in">Despite company concerns,
antitrust likely wouldn&rsquo;t be an issue for Enhabit unless it tried to combine with UnitedHealth Group Inc. (UNH), which is seeking
to acquire rival hospice and home health provider Amedisys Inc. (AMED) for $3.3 billion, the company follower said. An ongoing Department
of Justice investigation into UnitedHealth&rsquo;s market power could affect the Amedisys deal.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: justify; text-indent: 0.5in">Still, a potential second
Trump administration could be less interested in challenging certain deals, especially considering that the home health and hospice industry
is a fragmented market, company followers said.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: justify; text-indent: 0.5in"><B>Board Qualifications
in Spotlight </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: justify; text-indent: 0.5in">Putting the auction aside,
the two sides are battling over director qualifications and company oversight, with Enhabit arguing that Arex&rsquo;s candidates lack
board experience, while the insurgent fund insists incumbent directors don&rsquo;t have home health and hospice expertise.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: justify; text-indent: 0.5in">Four of five Enhabit &ldquo;transition&rdquo;
directors, who previously held board seats at the company&rsquo;s prior parent, are set to step down at the 2024 annual meeting, scheduled
for July 25, bringing the board size to nine. Governance expert Charles Elson, founding director of the Weinberg Center for Corporate
Governance at the University of Delaware, will be the only former Encompass director to remain.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: justify; text-indent: 0.5in">Enhabit insists its directors
are aligned with key opportunities, as six oversaw the &ldquo;company through a period of instability and positioned&rdquo; it for growth,
while two others have executive level experience at health insurers Aetna Inc. and UnitedHealth amid a &ldquo;payor innovation strategy&rdquo;
involving renegotiating contracts with private insurers. Company followers said Enhabit has struggled to shift some of its business from
the traditional fee-for-service Medicare program to lower-paying Medicare Advantage plans.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: justify; text-indent: 0.5in">Susan LaMonica, the company
said, brings key human resources experience &mdash; she&rsquo;s chief human resources officer at Citizens Financial Group Inc. (CFG).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: justify; text-indent: 0.5in">The company also already
has activist-related directors: Elson, a governance expert, previously was nominated by activists, while Barry Schochet was installed
in a March 2023 settlement with two other investors, Cruiser Capital Advisors LLC and Harbour Point Capital Management LP. Director Stuart
McGuigan, a cybersecurity expert, was a mutual pick in that agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: justify; text-indent: 0.5in">Alternatively, Arex promoted
its candidates&rsquo; home health and hospice care experience. Dissident nominee Gregory Sheff, previously interim president of home solutions
at Humana, also served as chief medical officer of the division while candidate Maxine Hochhauser was COO of Addus HomeCare. Mark Ohlendorf
previously was Brookdale Senior Living Inc. (BKD) president.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: justify; text-indent: 0.5in">Enhabit has complained
the dissident nominees&rsquo; home health experience is unproven or &ldquo;dated,&rdquo; while Arex has pointed out that incumbent directors
have overseen a significant share price drop.</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 12pt"><B>About AREX</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 12pt; text-align: justify">AREX Capital Management, LP is a value-oriented
investment firm based in New York City. AREX takes a long-term, opportunistic approach to investing and focuses primarily on publicly
traded companies with significant, unrealized potential.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 12pt"><B>Investor Contact</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 12pt">Saratoga Proxy Consulting<BR>
John Ferguson<BR>
(212) 257-1311<BR>
rehabEHAB@saratogaproxy.com</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 12pt"><B>Media Contact</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0 0 12pt">Longacre Square Partners<BR>
Greg Marose / Charlotte Kiaie<BR>
(646) 386-0091<BR>
rehabEHAB@longacresquare.com</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0"></P>

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