The investment group looking to buy Advocat say the nursing home chain's directors have too quickly dismissed their offer and are betting on a strategic plan that hasn't yet produced results.
At the same time, Covington Health Group is pointing out that the 2012 profit targets for Advocat executives' bonuses is 20 percent lower than last year's.
"How long must shareholders wait for things to improve such that value in excess of $8.50 a share is created for shareholders?" Covington President John McMullan wrote in a letter to Advocat's shareholder base. "And why should shareholders accept operating income levels for determining bonuses that actually decrease? The Company appears to be aiming lower not higher."
Advocat directors on Monday turned away Covington's overture, saying the bid doesn't take into account the company's prospects for growth based on acquisitions and technology investments in recent years. But McMullan and his team say the strategic plan isn't new and hasn't been generating growth in profits or in the company's stock price.
Investors still aren't giving Covington's bid much chance: At about noon, Advocat shares (Ticker: AVCA) were up about 2 percent on the day to about $6.40. That's 25 percent below Covington's bid and only a little bit higher than where the stock stood at the end of February.