Activist Engine Capital pushes for changes at Acadia Healthcare

Sept 24 (Reuters) - Activist investor Engine Capital has urged Acadia Healthcare ACHC.O to add directors to its board and explore a potential asset sale to fund buybacks, sending the company's shares up nearly 11% in morning trading.

Engine Capital, which owns an about 3% stake in the operator of centers that help people with mental health issues and addiction, said the company has sustained negative returns due to ineffective execution of its reorganization in 2022.

Acadia did not immediately respond to Reuters' request for comment.

The reorganization shifted the reporting structure from geographies to type of service, Engine said in a letter to the company's board on Wednesday. It added it was logistically much harder to supervise and visit facilities across the nation instead of within a region.

The activist investor urged for a major overhaul of the company's governance, asking for a board refresh, cost cutting, and sale of assets to repurchase undervalued shares.

Engine asked for the replacement of several long-tenured directors with new directors who possess operational skills in behavioral health and capital allocation expertise.

"It is clear from our research that the need for behavioral health services across the country is acute and will continue to grow," said Engine, as it noted the company's ownership of most of its real estate and strong free cash flow.

The company's shares are down more than 70% since reaching record highs in 2022.