In this age of corporate austerity, Chemed appears to be the latest company to face anger from some of its shareholders over a brand-new corporate jet.

A group led by the hedge fund MMI Investments sent a harshly worded letter to Chemed’s new chairman Thursday, excoriating the company’s decision to spend nearly $9 million on what it described as a 15-seat Hawker plane in November.
Chemed fired back by saying the jet was a six-seat plane, virtually identical to the 30-year-old one it replaced, and stated that the MMI letter contained “many factual errors.”

MMI Investments is engaged in a proxy battle with Chemed, and it is seeking to replace five Chemed board members with its own nominees at the company’s shareholder meeting next month.

MMI has urged Chemed, which owns the Roto-Rooter drain cleaning service and the Vitas hospice care business, to split itself into two separate companies. MMI and the other members of its group claim to hold about 3.6 percent of Chemed’s stock.
Chemed has said the timing is not right for a breakup of the company.

In the letter to Chemed’s new chairman, George J. Walsh III, the president of MMI, Clay B. Lifflander, claims that Chemed’s Jet Resource subsidiary paid nearly $9 million to buy a second Hawker plane late last year. While he conceded that the subsidiary does offer charter services to outside entities, Mr. Lifflander still questioned whether the purchase made sense in the current environment.

“We can think of no reason stockholders could possibly trust the timing of a management and board who chose to upgrade its private jet fleet at stockholder expense in the midst of a 100-year storm in the global economy,” he said in the letter.
A Chemed spokesman on Thursday called the letter a “blatant attempt to stretch the truth to advance MMI’s self-serving agenda, the immediate separation of Chemed’s businesses regardless of market condition.”

The spokesman said Chemed bought the new aircraft in November to replace one that was 30 years old. The company sold the older plane the following month and now owns only one aircraft — a six-seater, not a 15-seater, as MMI has claimed.
In the letter, MMI contends that the price of the jet amounted to 13 percent of Chemed’s net income in 2008 and about 36 percent of its capital expenditures for the year. MMI claims that the new plane has yet to secure a charter license, but has since gone on various flights to Bloomington, Ind., near where Ed Hutton, Chemed’s former chairman, and Sandra Laney, a current director, both keep personal residences.

In a news release earlier this month, Chemed said it would review MMI’s nominations and defended the performance of its current board, noting that the company’s stock had risen at a compounded annual growth rate of more than 15 percent since late 2003.

Shares of Chemed have declined about 7 percent in the last year, which is not nearly as much as the broader markets.

Given Thursday’s bitter back-and-forth, tensions are likely to build as the company’s shareholder meeting gets closer.