July 25 (Reuters) -

Enhabit ( EHAB ) investors elected one of AREX Capital

Management's director nominees after the activist investor

called on them to replace seven of the home health and hospice

provider's directors to help improve financial performance.

Enhabit ( EHAB ) said on Thursday shareholders added Mark

Ohlendorf to the board and re-elected eight of the company's

nine legacy directors, including the chief executive officer and

two directors who joined last year when Enhabit ( EHAB ) reached an

agreement with another activist investor.

Reuters first reported

AREX won one seat

and that Ohlendorf, who has experience as a public company

chief financial officer, was chosen. He will replace Susan

LaMonica who joined Enhabit's ( EHAB ) board as an independent director

in 2022.

Enhabit's ( EHAB ) fight with AREX is one of only a handful of

activist investors' campaigns to have made it to a vote this

year, underscoring many investors' and companies' preference to

reach agreements for board seats and other concessions before

shareholders weigh in.

While Enhabit ( EHAB ) has many hedge fund investors who were

thought to back AREX, it also counts the three main index funds

- BlackRock ( BLK ), Vanguard and State Street - as big

shareholders. In this vote those three sided with management's

candidates, sources familiar with the preliminary vote tally

said.

These investors ignored the recommendations of proxy

advisory firms Institutional Shareholder Services (ISS) and

Glass Lewis who had urged investors to elect three AREX

nominees, arguing the company needed more expertise in the home

health and hospice business and public company financial

reporting.

Enhabit's ( EHAB ) share price has tumbled roughly 60% since it

was spun off of post-acute healthcare services provider

Encompass Health ( EHC ) in July 2022. It climbed nearly 10% in

the last five days and was up nearly 4% in midday trading on

Thursday.

AREX, which owns a 4.9% stake in Enhabit ( EHAB ), urged

management last year to immediately start a strategic review.

Enhabit ( EHAB ) in May decided to continue as an independent company and

urged investors to stick with its directors now, arguing big

changes could jeopardize recent improvements.

In 2023, the company reached a settlement with Cruiser

Capital and Harbour Point Capital Management and appointed two

new directors to the board.