The next Nutrisystem domino has fallen at Tivity Health, where two directors will make way this spring for representatives of an activist hedge fund that bought 1.75 million shares of the company in the wake of last week’s exit of CEO Donato Tramuto.
New York-based HG Vora Capital Management’s recent bargain buying spree — Tivity shares were cut in half to about $11.40 between Wednesday afternoon and Monday morning — came after the firm had aggressively shrunk its stake in mid-January, when Tivity was changing hands around $25. The firm’s managers had since then been buying back shares in the low $20s but went whole hog late last week, rebuilding their holdings to 9.9 percent.
Per the deal announced Tuesday, HG Vora principals will name the two new directors “in the next several weeks” and the company will nominate the duo for election at its annual shareholders’ meeting this spring. Tivity has not said which of its current board members will not stand for re-election.
“The board is focused on delivering long-term, sustainable shareholder value. As part of this commitment, we maintain an active dialogue with shareholders and welcome all constructive input,” Chairman Kevin Wills said in a statement. “We are also committed to maintaining a strong, highly qualified and experienced board that serves the best interests of our shareholders, customers, partners and employees. We will maintain that strong commitment with two new directors through this agreement.”
Word of the agreement with HG Vora provided a floor for Tivity shares (Ticker: TVTY) Tuesday as the broader market sold off again on coronavirus fears. At about 1 p.m., they were changing hands at $13.16, up 1.2 percent on the day.
In a filing with the Securities and Exchange Commission, the principals of HG Vora — which was launched in 2009 and manages about $1.1 billion per its most recent quarterly report — aren’t specific about the type(s) of change they are pushing for at Tivity, whose leaders last week recommitted to weave together the Nutrisystem weight loss business with their fitness plans. HG Vora has in recent years prodded other companies for change, most recently Owens Corning and Caesars Entertainment.
“We are pleased to have reached this agreement,” Parag Vora, founder of HG Vora, said in a statement. “We look forward to continuing our collaborative engagement with the board and management team, in support of their efforts to drive long-term value creation for all stakeholders.”
HG Vora — which must keep at least a 5 percent stake in Tivity to retain its board rights — isn’t the only hedge fund active in Tivity these days. The managers of Hudson Executive Capital, who in December said they were going to get more actively involved in the company’s affairs, on Thursday and Friday bought a whopping 2.9 million shares of Tivity, growing their stake to 9.1 percent. And Altaris Capital — represented on Tivity’s board since last summer by co-founder Daniel Tully — last week renegotiated its agreement with the company to raise to 13 percent from 10 percent its maximum possible stake. Altaris now owns 8.5 percent of the company.
This story first appeared in our partner publication the Nashville Post.