First Hospital Corp. Sharply Cuts Offer for Comprehensive Care
Comprehensive Care Corp., the nation’s largest provider of hospital drug and alcohol treatment services, announced Friday that First Hospital Corp. drastically cut the price under what it had previously agreed to pay for the faltering Irvine company.
First Hospital’s action forced Comp Care to look for financing that would allow the company to stay open in the event the merger fails.
“We are seeking the financing and other things necessary to keep the company operating if the merger would not be approved,” said Stephen R. Munroe, Comp Care chief financial officer. He refused to comment further.
Comp Care’s stock fell $2.125 Friday, closing at $8.50.
First Hospital, which is based in Norfolk, Va., cut the cash portion of its $130-million bid from $5 a share to $3 a share and said Comprehensive Care is free to entertain other offers.
The two companies had announced in April their intention to merge. They were to become a new public company called FHC Comp Care, and plans called for Comp Care to move its headquarters to Virginia.
“Obviously, First Hospital got a closer look at the financial condition of the company,” said Jeffrey Kilpatrick, president of Newport Securities in Costa Mesa. “Comp Care doesn’t have time to go out to seek another buyer. This makes the company very vulnerable.”
Comp Care reported Friday that it lost $5.1 million for the fourth quarter ended May 31, contrasted with a profit of $2.4 million for the same period a year earlier. Sales for the quarter fell 5% to $51.4 million.
For the year ended May 31, Comp Care earned $502,000, contrasted with nearly $9 million earned for fiscal 1988.
The blame for the fourth-quarter loss was placed in part on a steady decline in the number of people checking into the company’s alcohol and drug treatment centers and on the shorter stays among the people who did check in.
The problem has been an increase in competition, something Comp Care saw little of for many years.
Comp Care operates its CareUnit alcohol and drug dependency programs under contracts at 170 hospitals across the country. The firm also owns 23 hospitals in 10 states, among them facilities in Brea, Orange and Costa Mesa.
The occupancy rate in some of the Comp Care facilities fell from 66% for the fourth quarter of 1988 to 57% for that period this year, the company reported Friday. The company said further that it does not expect that figure to improve for the next quarter.
Comp Care said Friday that it had agreed to sell its corporate headquarters and intends to sell some land it owns in Miami. The buyer for the Irvine building was not disclosed.