Value Health, Preferred Health Managed Care Firms to Merge

Two Connecticut companies will merge by year’s end to become one of the country’s largest providers of managed mental health and substance abuse services, if shareholders and regulators approve the deal.

Value Health Inc. of Avon said Thursday that it will acquire Preferred Health Care Ltd., which is based in Wilton, in a stock-swap deal.

Under the agreement, each share of Preferred’s stock would be exchanged for 0.88 shares of Value Health’s stock.

Value Health shares lost $1.75 on Thursday to $34 on the New York Stock Exchange, making the total value of the deal about $404 million, down from $425 million based on Wednesday’s close.

Preferred shares gained $6.875 to $27.875 on Nasdaq. The per-share value of the deal at Thursday’s close was $29.93.

American Psychmanagement, which is Value Health’s behavioral health subsidiary, and Preferred are leading providers of programs managing cost and quality of mental health and substance abuse benefits for major employers, health maintenance organizations and insurance companies.

Preferred’s principal product is its Psychcare program, a managed mental health system that includes patient evaluation, referral to the company’s preferred provider networks and utilization revenue.

The combined behavioral divisions of the companies would provide managed mental health, substance abuse and employee assistance services to more than 12 million people, with estimated 1993 revenue of $165 million.

“We are excited by the opportunity of combining the best of both companies’ organizations, provider networks and systems to create the premier managed mental health company,” said Robert E. Patricelli, chairman and chief executive of Value Health.

Overall, the combined company would provide services to 50 of the nation’s largest 250 companies and more than 32 million people, the companies said.

Value Health has an option to buy up to a 19.9% interest in Preferred prior to the closing of the deal.