AMI Turns Down Pesch’s Sweetened Takeover Proposal
American Medical International, for the second time this year, has rejected a takeover proposal from Chicago physician LeRoy A. Pesch, terming his latest $1.91-billion offer “seriously inadequate.”
AMI--now the nation’s third-largest hospital chain when ranked by revenue--was unusually blunt in rejecting a sweetened $22-per-share offer of cash and securities from Pesch and Co., a health-care, information systems and real estate concern headed by Pesch.
AMI rejected Pesch’s first offer of $20 per share, or $1.74 billion, in cash on Feb. 9, just one week after Pesch announced his interest in acquiring AMI.
AMI Stock Dips
In a letter to Pesch, AMI said, “Your proposal appears, in substance, to be nothing more than a plan for recapitalization . . . which AMI could effect by itself if our board deemed it desirable.”
In composite trading on the New York Stock Exchange, AMI’s stock dipped 37.5 cents Tuesday to close at $19.125.
Pesch issued a statement late Tuesday saying only that “my associates and I are exploring all available options, and I will withhold further comment until we have chosen our course of action.”
Pesch’s bid for AMI is seen by analysts as an effort to establish an international health-care network anchored by Republic Health, a Dallas-based hospital chain Pesch acquired last summer. The rejection of his offer did not surprise analysts, however.
“They just really don’t want to do business with him,” said Bama B. Rucker, a health-care analyst at Hambrecht & Quist Inc. “I don’t think AMI believes he has the financing, or the management expertise or the strategy or . . . the wherewithal to carry out his deal.”
AMI spokesman Peter Dowd declined to say if the Beverly Hills chain is considering a recapitalization of its own to enhance shareholder values and thwart an unwanted takeover.
As for the prospects of an AMI recapitalization, Dowd said, “If we did decide to do it, we have our own financial adviser--Goldman, Sachs--to arrange it,” referring to AMI’s longtime investment banking firm. “We wouldn’t need an outsider to come in and do it.”
Many analysts point to American Health Properties Inc., a real estate investment trust started by directors of AMI, as evidence of AMI’s efforts in that direction, however.
Using some of the $186.5 million it raised in an initial public offering last month to acquire seven AMI hospitals, American Health is expected to help improve AMI’s bottom line by offering AMI a way to quickly sell its hospitals and lease them back from a third party. That will help AMI lower its costs and gain some tax benefits.
American Health named its top officers on Tuesday. AMI director Rocco C. Siciliano, a lawyer and former chairman and chief executive of Ticor, the financial services company, was named chairman and chief executive.
Robert L. B. Diener has been named president and chief operating officer. He had been a group vice president of AMI, with responsibility for domestic and international acquisitions.
Other directors are AMI Chairman Royce Diener; AMI President and Chief Executive Walter L. Weisman; Norman Barker Jr., former chairman of First Interstate Bank of California; Harvard University law professor Charles M. Haar; Former U.S. Labor Secretary James D. Hodgson; and health care management consultant Walter J. McNerney.
