Homedco Confirms Takeover Negotiations as Its Stock Soars

Homedco Group Inc., fearing takeover rumors may have fueled a nine-day run of its stock, confirmed Tuesday that it is in negotiations to acquire another health care company.

In a terse press release, Homedco said a threefold increase in its stock’s trading volume, which pushed prices up more than 14%, “may have been caused by rumors regarding a potential acquisition.”

Chief Financial Officer Lawrence H. Smallen declined to comment on the ongoing negotiations, including what company Homedco is considering buying or when such a purchase might be completed.

Smallen said company attorneys have advised Homedco officials that public confirmation about the takeover bid was required under Securities and Exchange Commission regulations.

“We were concerned there was a lot of activity in the stock,” Smallen said. “When that happens, you make some sort of an announcement so the general public would know.”

The press release, drafted by company attorneys, said the “outcome (of the takeover talks) is uncertain and no final agreement has been reached.”

Homedco, formerly a subsidiary of National Medical Enterprises, was founded in 1987 in a leveraged buyout from its former parent. It has since become a $270-million-a-year business, specializing in the burgeoning home health care industry.

Homedco went public in May, 1991, selling shares of stock for $15. The per-share stock price had climbed steadily to $29.50 in January but began falling to a low of $20.50 on May 29.

But when the stock market reopened June 1, the per-share price started climbing, reaching $23.50 on Monday. In addition, trading volume increased from 56,600 shares in the week ended May 29, to 179,000 shares for the week ended June 5.

The stock closed Tuesday at $23 a share.