Atlanta-Based Chain Opens Buyout Talks For Ailing Westworld
Westworld Community Healthcare Inc., the rural hospital operator whose fortunes have plunged since early 1986, said Friday that it is actively pursuing a tentative $90-million acquisition proposal from Gateway Medical Systems Inc. in Atlanta.
Officers from both companies met in Atlanta late Friday for initial discussions. Talks were expected to continue over the weekend.
“We consider this a credible proposal, and we are willing to sit down and talk about it,” Glenn Caster, Westworld’s vice president, said from the company’s Laguna Hills headquarters.
The offer from Gateway, which operates 10 hospitals in the South and Southeast, comes at a crucial time for ailing Westworld. In the last several weeks, the company has said it is considering filing for bankruptcy reorganization to solve the financial problems it created with its aggressive and highly leveraged expansion of 1984-86.
Those moves, which made the company a darling of investors, saw Westworld grow to a 40-hospital chain and accumulated along the way a debt load that now totals $171 million. The debt includes $65 million in defaulted debentures and a $70-million credit line due to expire June 30.
In the last 15 months, Westworld has lost nearly $135 million and has pared its chain down to 14 hospitals.
Gateway’s proposal calls for it to exchange a combination of cash and common and preferred shares, worth a total of $90 million, for all of Westworld’s common shares and debt. In that form, the offer would require Westworld’s banks and other lenders to accept substantially less than full repayment of their loans.
Westworld’s shareholders, some of whom paid up to $15.375 per share, aren’t likely to fare much better; the price of the company’s shares has plunged to about 25 cents.
Gateway President Robert Scruggs said his company’s offer is not contingent on Westworld’s filing for protection under Chapter 11 of the U.S. Bankruptcy Code.
However, Caster said such a filing is theoretically possible if Westworld’s lenders are unwilling to cooperate with a buyout proposal offering less than full repayment.
Westworld’s bankers, which include Bank of America, have been informed of the pending offer but have declined to comment on it.
