AMI Agrees to Reduced Offer From Investors
The investment group that recently agreed to acquire American Medical International will be allowed to cut its offer by $230 million under a deal that also allows AMI to consider new takeover bids.
AMI said Monday that it won the right to seek other offers in exchange for allowing IMA Acquisition Corp., an investment group that includes Chicago’s Pritzker family and First Boston Corp., to lower the value of its tender offer to $1.67 billion in cash. IMA, which agreed July 6 to acquire the Beverly Hills-based hospital management firm, said last Thursday that it would not be able to arrange financing for its original $1.9-billion offer.
IMA, which has extended its offer four times, has now set a deadline of Oct. 25 for stockholders to tender their shares in the deal. The per-share price under the original July 6 agreement was $26.50 in cash and about $1.50 in new AMI stock. Under the new proposal, IMA is offering $23 a share in cash plus new AMI stock that analysts value at $1.50 to $2.00 per share.
Mum on New Offers
AMI shares closed Monday on the New York Stock Exchange at 23.875, up 37.5 cents.
Under another provision announced Monday, AMI is now required to pay the investor group $35 million in expense reimbursement fees, rather than $50 million, if the deal is not completed under certain circumstances.
AMI, which is legally obligated to obtain the best value for shareholders, would not say whether it has received new offers. Several securities analysts, however, said they doubted that any competing bids would emerge.
“It’s unlikely there will be new offers,” said John Hindelong, an analyst at Donaldson Lufkin & Jenrette Securities in New York. “It now looks like this deal is close to getting done.”
Seeking an Extension
The acquisition has hit a number of snags along the way. IMA originally planned to finance $250 million of the deal through payment-in-kind bonds, which pay accumulated interest only when they mature in five years. The investment group planned to take tax deductions on those interest payments annually, an allowable practice under current tax law. However, a congressional bill--submitted after IMA reached its original agreement on July 6--would eliminate the annual tax deduction on payment-in-kind bonds, boosting the cost of the buyout by millions.
The House of Representatives recently passed the bill, but the Senate has yet to approve the proposal. IMA Acquisition has been seeking an exemption from the bill’s provisions.
A number of industry analysts said the new bid is more a reflection of the investment group’s concern about the skittish junk bond market than worry over tax law.
