Cerebus getting cooked

"Cerberus Capital Management is, in part, a private equity firm. That means it often buys companies, controls them, and then sells them.

• This rudimentary description might seem obvious to you, but apparently not to Cerberus.

Behind the scenes: Cerberus took issue with what I wrote on Wednesday about Steward Health, the hospital chain that it owned between 2010 and 2020.

• Not the part about how Steward is struggling under the weight of liabilities accrued under Cerberus' watch, nor how those transactions resulted in hundreds of millions of dollars in profit for Cerberus and its investors.
• Instead, Cerberus disagreed with my characterization of Cerberus being in charge of Steward in the first place. Really.

Two things I wrote: "In 2014, Cerberus closed one of the Mass. hospitals it had acquired, despite having pledged not to do so for at least 10 years after the acquisition, as part of the state regulatory approval process."

• Also: "Cerberus, which threatened to shut a small Pennsylvania hospital early in the pandemic..."

How Cerberus replied, via a spokesperson:

"Neither of these statements are true. It is inaccurate to attribute either of these actions to Cerberus. Steward made its operating decisions. Cerberus did not have a majority of seats on the Board.  And, at the risk of stating the obvious, Steward and Cerberus are separate companies."

Between the lines: First, Cerberus did indeed have a majority of seats on Steward's board, according to cached versions of the company's own website and public disclosures.

• There isn't one publicly available for 2014, but I did find them for 2010, 2012, 2019 and 2020. In each of them, Cerberus had numerical board control. In fact, that's one reason these sorts of deals are sometimes referred to as control investments.
• I asked Cerberus on Wednesday night for details of the 2014 board composition, but so far they've not provided it. Which is weird, since they seemed so sure in the original email.
• Then there's the operating decisions, of which Cerberus is trying to wash its hands. Perhaps it should check the section on its own website titled "Operational Private Equity," in which Cerberus extols its efforts to "identify and execute key operating initiatives" at portfolio companies.
• Yes it's true that Cerberus and Steward are separate companies, but Steward was not independent of Cerberus. Instead, it was structurally subordinate to Cerberus. At the barest minimum, Cerberus would have learned about hospital closure plans after they were announced, and could have reversed them.

The bottom line: It isn't unusual for companies or investment firms to complain about something written here. But Cerberus might win the prize for unintentional comedy."