SCHEDULE 14A
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SCHEDULE 14A INFORMATION
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AETNA INC.
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A link to the following Hartford Courant article has been posted on the
internal employee website of Aetna Inc. ("Aetna").
# # #
Proxy Battle Heats Up At Aetna
Investor Firm Wants `Poison Pill' Vote
April 6, 2002
By DIANE LEVICK, Courant Staff Writer
Dissident Aetna shareholders, trying to remove potential obstacles to any
future sale of the company, changed strategy Friday in a proxy fight that could
cost the struggling insurer as much as $2.4 million.
Providence Investors LLC is now proposing one nominee for Aetna's board of
directors instead of three people, hoping to sway more shareholder votes by the
company's annual meeting April 26.
The New York-based investment firm, which holds 16,800 Aetna shares, has been
trying to get the company to put its "poison pill" to a binding shareholder
vote. Poison pills are stock-related rights that make it difficult and costly
for a potential acquirer to buy a company without negotiating with its board.
On March 27, Providence made another private offer to Aetna to withdraw the
dissident slate of proposed directors in return for a vote on the poison pill,
but Aetna rebuffed the suggestion.
In a federal filing on Friday, Providence said it will run only Lawrence G.
Schafran for Aetna's board, and has dropped the other two nominees from its
slate - Chris C. Riedel and James F. Bingham Jr.
Schafran, 63, is managing general partner of L.G. Schafran &Associates, a
private investment, advisory and development firm. As a shareholder-nominated
director of COMSAT, he played a role in getting the company sold to Lockheed
Martin Corp.
Providence's proxy also lists two of Aetna's three incumbent nominees, too:
Judith Rodin and Joseph P. Newhouse. Three directors must be elected this year
under the staggered board terms.
So Providence's narrowed slate pits Schafran against Ellen M. Hancock, an Aetna
director since 2000. Hancock, a former IBM executive, was chief executive of
Exodus Communications Inc. until weeks before the Santa Clara, Calif., company
filed for bankruptcy protection in late September 2001. The company, which owns
computer-server farms that manage corporate websites, was caught in the
collapsing Internet economy and hadn't made a profit since it went public in
March 1998.
Providence decided to push only one of its own nominees because "it increases
the probability of success," said Jay Hill, director of research at Providence
Capital. "What we do want is one shareholder-nominated director for a
watchdog."
Aetna spokesman Roy Clason Jr. said Friday, "Aetna's board slate is far more
qualified and experienced than any or all [nominees] proposed by Providence
Capital. Months have passed, and Providence Capital still has yet to present a
vision for Aetna, a strategy for Aetna, or a plan for Aetna."
Clason also said "Aetna's turnaround is on track, and we still expect to be
profitable this year," excluding a previously announced $3 billion hit from new
accounting rules.
Even if Providence got three nominees elected, it would still have only a
minority on Aetna's board, which will shrink from 12 to 11 members with William
Donaldson's retirement.
Providence is far more likely to advance the poison pill issue through its
proxy fight than to get anyone elected to Aetna's board, some investors and
analysts say.
2
"The current management team is doing a good job, so there's no reason to
support a dissident slate," Richard S. Pzena, president and chief investment
officer of Pzena Investment Management LLC in New York, said Thursday before
Providence dropped two of its three nominees. Pzena's firm has about 3.3
million Aetna shares.
However, Pzena said his firm favors shareholder resolutions that increase the
accountability of a corporation to its shareholders, and would tend to support
repeals of poison pills.
TIAA-CREF, another one of Aetna's largest shareholders, hasn't decided how to
vote, but says it has been "quite pleased with the management of Aetna and the
steps they've taken" toward a turnaround.
Along with electing directors, Aetna shareholders will vote on a proposal by a
Virginia stockholder urging the board to bring any future poison pill to a
vote. The resolution isn't binding, though, and Aetna isn't saying what its
board might do if it's approved.
With or without a poison pill, Aetna would be more vulnerable in 2004, anyway,
if shareholders aren't happy with the company by then. That's the year the
company drops staggered board terms and all seats are up for election, making
it easier for a rebel group to gain control.
Meanwhile, Aetna disclosed this week that it will pay Georgeson Shareholder
Communications as much as $500,000, plus out-of-pocket costs for proxy
solicitation efforts - far more than the $16,000 fee last year. In addition,
Aetna has hired MacKenzie Partners Inc. for consulting on the proxy fight.
"It's very unfortunate that the cost of this contest could go as high as $2.4
million," Aetna's Clason said. "However, we are working very efficiently and
making every attempt to spend as little as possible."
The total amount Aetna spent on the proxy process last year was unavailable
Friday.
# # #
No consent of the author or publication has been obtained for the use of this
article.
Aetna's 2002 Proxy Statement was filed with the Securities and Exchange
Commission on March 18, 2002 and mailed to Aetna's shareholders on or about
March 20, 2002. Aetna filed additional participant information with the SEC on
April 4, 2002. Aetna's shareholders should read these materials, and any
additional materials that Aetna files with the SEC, because they contain
important information relating to the 2002 Annual Meeting. In addition, this
filing may contain forward-looking statements made by Aetna, including those
regarding Aetna's performance and the status of its turnaround. These represent
management's best view of these matters, although important risk factors,
including unanticipated increases in medical costs, could cause actual future
results to differ materially from those currently estimated by management. For
more discussion of important factors that could materially affect Aetna, please
see the risk factors discussed on pages 36-41 of Aetna's 2001 Annual Report,
Financial Report included with our 2002 Proxy Statement.