AMI Pondering Restructuring, Buyout Plans : Health-Care Firm Looks for Way to Enhance Holders’ Equity as Profit Slides 25%

Times Staff Writer

American Medical International, under pressure to boost the value of its shares, said its board has received two different proposals--including a plan put forward by a director to take the company private.

The director--Dr. M. Lee Pearce, a savvy investor who trained as both a lawyer and physician--has joined with two former AMI executives to propose a leveraged buyout at a price of $24 per share, including cash of $20 to $22.

On the other hand, an investment banking firm has advised the board that a restructuring over six to nine months could result in shareholder values of $25 to $29, including a special cash dividend. The plan would allow the company to continue to be traded publicly.

On Thursday--the day the proposals were presented to the board--AMI shares closed at $17.875, down 12.5 cents, with a volume of 224,200 shares changing hands. The markets were closed Friday.


Mick Taylor, a spokesman for Beverly Hills-based AMI, said six outside directors from the company’s 14-member board have been named to a special committee to evaluate the plans. Taylor declined to identify the investment bank but said management had cooperated in supplying information.

Separately, the health-care company reported that its second-quarter profit declined 25% to $18.1 million, primarily because the company sold 36 of its hospitals to an employee-owned company, Epic Healthcare Group of Dallas. For the three months ended Feb. 28, the company posted revenue of $678.2 million, down from $766.1 million a year ago.

AMI has retained its larger operations, including 55 hospitals and psychiatric treatment centers in the United States and 20 facilities overseas. Although the company sold its Westside Hospital in Los Angeles and South Bay Hospital in Redondo Beach, it continues to operate a number of California facilities, including Tarzana Regional Medical Center, Medical Center of Garden Grove and the Irvine Medical Center, nearing completion in Orange County.

The company’s most salable remaining assets may include its 65%-owned hospitals in Britain, which could fetch more than $300 million in the estimate of Rae E. Alperstein, a securities analyst with Bateman Eichler, Hill Richards in Los Angeles.


In a report published last week, Alperstein estimated that the company could raise $600 million to $800 million from the sale of the overseas facilities, six psychiatric units in the United States and AMI’s 1 million shares in American Health Properties. With the cash, AMI would have the option of reducing its $1.3-billion debt and buying back stock to enhance shareholder’s values, the analyst said.

If the company were broken up and its assets sold separately, Alperstein estimated, it would be worth $25 to $28 a share.

Pearce is the company’s largest individual shareholder, with about 10% of the 68.5 million AMI shares outstanding. The 58-year-old physician mounted a campaign over a year ago to hasten AMI’s restructuring, and he made good a threat to help oust management by August when the pace disappointed him. He has been a director of AMI since October.

A Pearce associate indicated that the buyout offer is not meant to undermine AMI’s new chief executive, Richard A. Gilleland, who was recruited in January to head the company.

“We think a great deal of Dick Gilleland,” said Charles P. Reilly, a former AMI executive and director who has aligned with Pearce in the buyout proposal. Reilly and former AMI Group Vice President Michael E. Gallagher are partners in Shamrock Investments Acquisition Corp., a Century City firm that is not affiliated with the Roy Disney family’s company, Shamrock Holdings.

A pivotal vote may come from a group of investors led by wealthy Texan Sid Bass, which controlled about 11% of the company’s stock as of January. The Bass group is not part of the Shamrock group, Reilly said, but he added that “As a matter of courtesy, I have had a discussion with a representative of the Bass group informing them of our offer.”

An additional 1.7 million shares, or about 2% of AMI stock, are controlled by a group of investors led by former Bass associate Richard Rainwater.