President Leading Effort to Buy Alliance Imaging in Leveraged Buyout

Times Staff Writer

The president of Alliance Imaging Inc., a La Palma firm that leases diagnostic imaging machines to hospitals, is leading an effort to buy the company in a transaction valued at more than $51 million.

Next week, company shareholders will receive a tender offer of $9.75 a share from CTFG Acquisition Corp., a firm formed by Alliance Imaging President Richard N. Zehner and Donaldson, Lufkin & Jenrette, said Douglas Hayes, senior vice president of the New York securities firm.

Hayes said the securities firm has agreed to provide financing for the proposed leveraged buyout. He said a majority of the company’s eight directors, who together own 70% of the company’s common stock, have agreed to accept the offer on condition that the same price is paid to public shareholders.

After Zehner announced the impending offer Tuesday, Alliance Imaging’s stock price leaped from $5.25 at the close of the market Friday to $9 a share at the close of trade Tuesday. The stock ended trading Wednesday at $9.125 a share.


Zehner and Hayes said they believe that Alliance Imaging’s stock has been undervalued because of an overall stock depression on Wall Street, the unusually small number of the company’s own shares that are in public circulation and the loss of the company’s lead investment broker.

Hayes pointed out that last year’s October stock market crash followed soon after the company in August made its first public stock issue, selling 900,000 shares of common stock for $7 a share and $15 million in subordinated debentures. That was the first blow to the stock price.

Then the chief investment broker for Alliance Imaging, L.F. Rothschild, pulled out of the over-the-counter market two months ago. This caused the stock price of Alliance Imaging to plunge still lower and made it difficult for shareholders to sell their securities, Hayes said.

“I see more value in the company than the stock market has portrayed,” said Zehner, who founded Alliance Imaging and already owns about 9% of the company, which he intends to take private again.

Hayes said that if the leveraged buyout is successful, his firm will bring in large institutional investors such as banks, insurance companies and pension funds to refinance the acquiring corporation.

Zehner, who currently owns little more than half of CTFG Acquisition Corp., said that after the acquisition he will probably be Alliance Imaging’s single largest shareholder.

Zehner pointed out that Alliance Imaging has posted increasing revenues and earnings every quarter since it went public. In its first fiscal quarter ended July 31, the company posted earnings of $398,000, up 176% from earnings of $144,000 for the same period last year. Its first fiscal quarter revenues were $7.41 million, up 78% from $4.2 million.