HealthSpring investors bring recapitalization proposal to full board after CEO fails to respond

By Lisa Kerner

Charlotte, N.C., June 27 - HealthSpring, Inc. investors led by the Clinton Group, Inc. shared their proposal designed to increase shareholder value with the company's full board after chairman, chief executive officer and president Herbert A, Fritch did not reply to Clinton' June 15 letter outlining the investors' recommendations.

Funds and accounts managed by Clinton Group currently beneficially own approximately 5% of the outstanding shares of HealthSpring, according to a schedule 13D filing with the Securities and Exchange Commission.

In the June 15 letter, the investors said while they support the management team, HealthSpring's stock price has fallen.

"Furthermore, the strong cash generation of your business over the past five quarters SHOULD HAVE increased your market value of equity," the letter stated.

Clinton Group recommended the company "execute a leveraged recapitalization in conjunction with a Dutch tender offer for approximately 30% of the outstanding shares of the company at a reasonable premium to the current market prices." The suggested range for the Dutch tender is $22.00 to $23.00.

HealthSpring should also consider a "modest $338 million credit facility borrowing (revolver and term loan B)."

"This debt financing along with cash on the balance sheet would comprise the amount required to execute the Dutch tender," said Clinton Group.

Clinton Group's senior managing director Conrad Bringsjord invited the board to meet and discuss the proposal.

HealthSpring is a Nashville-based managed care organization.

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