Bondholders May Force Charter to CPC’s Negotiating Table : Merger: An unofficial committee of investors who bought $820 million worth of Charter secured debt is urging management to consider the proposal.
Charter Medical Corp., which on Friday rebuffed an unsolicited $1.1-billion buyout offer from rival Community Psychiatric Centers Inc., may face pressure from holders of its bonds who oppose the decision not to consider the merger, an adviser to the bondholders said Monday.
Meanwhile, CPC Chairman James Conte said Monday that Charter’s rejection of the offer was not surprising and “fit management’s needs to perpetuate itself at Charter.” He said the Laguna Hills firm is hoping that the bondholders will force Charter’s management to the negotiating table.
And on Monday it seemed that Charter’s bondholders may be trying to do just that.
“We would like the company to spend more time considering the proposal,” said Robert Delaney, a vice president with Goldman, Sachs & Co., a New York investment bank that is advising an unofficial committee of investors who bought $820 million worth of Charter secured bonded debt.
Delaney said the committee is urging the Macon, Ga., company to meet with CPC to get more details about the proposal, which would create the nation’s largest provider of psychiatric services.
He said bondholders want more information so they can compare CPC’s offer of $1.1 billion in cash and stock to Charter management’s own plan for restructuring $1.7 billion in debt that has been crippling the firm.
Charter said in a prepared statement Friday that its directors had “unanimously determined not to enter into discussions with Community Psychiatric Centers following CPC’s unsolicited and highly conditional proposal to the company.”
Charter contended that the proposed merger would violate the federal antitrust laws and that any discussions about such a combination would have “a disruptive effect” on Charter’s operations.
And Charter said it wouldn’t comply with CPC’s request for financial information about Charter for fear of divulging trade secrets to a competitor.
Richard Conte, CPC’s president, described Charter’s objections as “red herrings.” “There is nothing we need to glean in the way of management techniques or secrets from a company that is not able to pay its debt,” he said.
Conte also dismissed Charter’s antitrust concerns, arguing that most of CPC’s 50 psychiatric hospitals are in the West, while Charter’s 88 facilities are concentrated in the Southeast. In cities where the companies’ facilities overlap, he said, any antitrust questions could be resolved by selling certain facilities. He contended that the merged entity would represent “less than 15% of the nation’s private psychiatric beds.”
Goldman, Sachs’ Delaney said the bondholders are not convinced that the concerns raised by Charter directors justify their refusal to not talk with CPC. “We need to sort through the reasons and decide if they are valid,” he said.