Community Psychiatric to Spin Off 2 of Its 3 Divisions Into New Firm

The directors of Community Psychiatric Centers in Laguna Hills approved a plan Wednesday to spin off two of the company’s three divisions into a new corporation.

The operator of psychiatric hospitals and other medical businesses said the move is intended to speed growth of both the remaining company and the newly formed business, which will be named Vivra.

Community Psychiatric will retain ownership of its national psychiatric hospital chain, which accounted for 76% of the company’s fiscal 1988 revenue of $355 million. Vivra will operate a national chain of kidney dialysis centers and a home health care services business.

Newly issued shares of Vivra will be distributed at no cost to holders of Community Psychiatric stock, who will retain their ownership in the existing company. The distribution will be based on a ratio of one Vivra share for every five to 10 Community Psychiatric shares, with the exact number to be determined later.

James W. Conti, Community Psychiatric’s chief executive, said Vivra’s stock probably will be traded in the over-the-counter market.

Conti said the spinoff is intended to enhance the growth opportunities of the two companies, and also to make Community Psychiatric’s stock more attractive to investors.

“CPC stock has been hampered in the past year because of the slower growth rate and smaller profit margins” of the kidney dialysis and home health care units, Conti said.

In Wall Street jargon, Community Psychiatric stock will become “a pure play” in which its business is devoted virtually entirely to one line of business--psychiatric clinics. Since many investors prefer to buy stocks of tightly focused companies instead of more diversified firms, that could fuel more investor interest and higher stock prices, he said.

Newly formed Vivra should benefit, Conti said, because it will be able to seek acquisitions of companies in related businesses that Community Psychiatric previously shunned as too speculative.

Roger L. Green, Community Psychiatric’s chairman, will leave that post to serve as chief executive of Vivra. He will continue as a consultant and director of Community Psychiatric.

Conte will continue as president and chief executive of Community Psychiatric. He also will become a director of Vivra.

Community Psychiatric stock closed Wednesday at a 52-week high of $29.875 per share, up $1, in New York Stock Exchange trading.

The company employs about 5,000 people nationwide, about 300 of whom work in Orange County.