Berggruen gives SunLink deadline to meet, reiterates offer for the company

By Lisa Kerner

Charlotte, N.C., March 25 - SunLink Health Systems, Inc. investor Berggruen Holdings North America Ltd. gave the company until April 11 to either agree to begin good faith discussions or publish the company's reasons for rejecting the offer made by the investor and Resurgence Health Group, LLC.

Berggruen made the demand in a March 24 letter to Dr. Steven J. Baileys, chairman of SunLink's special committee. The letter was included as part of a schedule 13D filed with the Securities and Exchange Commission.

"Make no mistake, if our fully financed $7.50 all-cash offer, subject to confirmatory due diligence, is not accepted or rejected by April 11, 2008, we expressly reserve the right to take our case directly to your entire stockholder base with all methods at our disposal," Berggruen's letter stated.

"Do not underestimate our resources or our resolve," the letter, signed by Berggruen president Philip H. Eastman III, said.

The investor also took issue with SunLink's draft confidentiality agreement, saying it contained an "inappropriate and overbroad" standstill agreement.

According to Berggruen, the agreement would have prevented the investor from trading in SunLink's securities and from taking part in "value maximizing transactions."

Berggruen also demanded immediate delivery of materials previously asked for on Feb. 6.

According to a March 3 SEC filing, Berggruen once again requested to meet with SunLink's board to discuss the $7.50-per-share offer from Berggruen and Resurgence Health Group.

Berggruen, with a 9.4% stake in SunLink, teamed with Resurgence and agreed to provide the equity financing needed for Resurgence to close the transaction, it was previously reported.

In a Feb. 29 letter to the board, Berggruen accused SunLink of paying lip service to the investor. Other than asking Berggruen to sign standstill and confidentiality agreements, SunLink has not attempted to meet to discuss the offer, according to the letter.

In a prior SEC filing, Berggruen chief operating officer Jared S. Bluestein implied that SunLink chairman Robert M. Thornton Jr. runs the company like his personal candy store.

According to the shareholder, SunLink management has failed in the past 24 months to enhance shareholder value and instead has "impeded multiple transactions offering liquidity to shareholders at a premium to market price."

In his response, Thornton said SunLink's board had "no duty to respond" to Berggruen and accused the investor of "attempting to force a quick, and if possible cheap, sale of SunLink."

Resurgence is an Atlanta-based privately held company formed to acquire and operate rural and other small hospitals.

SunLink, also based in Atlanta, provides health-care services through the operation of exurban and rural community hospitals.

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