IMA to Buy Hospital Chain for $1.7 Billion : American Medical International Accepts Bid That’s $200-Million Less Than Original

IMA Holdings Corp. said today it has reached a reduced $1.7-billion merger deal of $26.50 a share with the American Medical International Inc. hospital chain.

IMA, an investment group that includes Chicago’s Pritzker family and First Boston Corp., will be buying a chain that has 54 U.S. hospitals and 24 overseas. It will also assume about $1.3 billion in debt.

IMA originally agreed in July to pay $1.9 billion for American Medical International, but AMI said last week the bid had been lowered to $26.50 a share from $28 a share.

Tender Extended 4 Times

IMA extended its original tender offer four times as a result of uncertainty over congressional action on the tax treatment for $250 million of the junk bonds being used to finance the deal.

“The new price is pretty much what people expected,” said Steve Reid, an analyst with L. H. Friend & Co. in Los Angeles. “I think it’s still a very healthy price for AMI.”

The revised merger reduces the number of shares that will be tendered from 68.8 million to 63 million. IMA has boosted the amount of IMA Holdings stock to be received by AMI shareholders from 10% to 20%.

The deal calls for $285 million in equity. IMA, a new company formed by First Boston and the leveraged buyout fund Harry Gray Melvyn Klein & Partners, said Chemical Bank and six other banks have committed to finance $1.07 billion of senior debt.

IMA said Chemical Bank is “highly confident” it can arrange the balance of $509 million of senior debt and also said First Boston has committed to provide $573 million in subordinated debt.

Analysts expected the price for the deal to be lowered for several months because of problems in the markets for leveraged takeovers and high-yield, high-risk junk bonds.

“In this case, the junk bond issue obviously came into play,” Reid said.

The revised tender offer will expire Oct. 25. Until then, AMI is free to solicit other takeover proposals, but analysts do not believe the IMA bid will be topped.

“I think a higher bid would be highly unlikely,” said John Hindelong of Donaldson Lufkin & Jenrette. “The price is very attractive if the hospital industry continues to stabilize.”

The deal marks the end of seven months of uncertainty about AMI, which received a $24-a-share buyout offer in March from a group led by Dr. M. Lee Pearce, an AMI director and major shareholder. An investment banking firm also submitted a competing restructuring plan at that point.

AMI, under pressure from key shareholders, said in April that it would seek competing offers. Brian Freeman Enterprises Inc. of Roseland, N.J., proposed that the company be acquired by an employee stock ownership plan at $27 a share before the IMA deal emerged.

Analysts expect AMI to sell off poorly performing assets once the deal is completed.