Comprehensive Care Drops Merger Plan
Loss-ridden Comprehensive Care Corp. called off its acquisition of Pennsylvania-based Mustard Seed Inc., citing concern by securities regulators.
The Costa Mesa health-care company dropped the deal in the hope that regulators will approve its long-delayed offer to pay off holders of $9.5 million of CompCare bonds that are in default, officials said.
The Securities and Exchange Commission told the company in mid-March that Mustard Seed’s financial statements should be added to its disclosures for the bond payoff because regulators considered the purchase a “material” event, company officials said. The purchase of the Ft. Washington health-care company would have increased Comprehensive Care’s annual sales by about 70% to $55 million.
“The SEC . . . would have required us to complete an audit of Mustard Seed, which we think would have delayed our ability to move forward on the [bond] offer,” said Chriss W. Street, Comprehensive Care’s chairman.
The company has stated repeatedly in its securities filings that its creditors could revive an effort to place the company in bankruptcy.
Robert Bailey, a vice president at Mustard Seed, said the company was disappointed that the deal fell through and said he hoped that the two companies might proceed with the merger sometime in the future.
Comprehensive Care promised the bond payoff early last year to satisfy creditors, who then dropped their petition to put the company in bankruptcy. The plan calls for holders of each $1,000 bond in default to receive $580 in cash and 12 shares of stock. As an alternative, holders who prefer to keep their bonds, would receive more than $150 per bond in overdue interest. The company’s stock closed Wednesday at $8.375, down 12.5 cents in trading on the New York Stock Exchange.
Comprehensive Care, which aims to transform itself from an operator of health-care facilities into a contractor of various managed care services, posted a loss of $1.8 million, or 67 cents per share, for the nine months ended Feb. 29, compared with a loss of $8.2 million, or $3.69 per share, in the comparable period a year earlier. Revenue increased to $24 million from $21.9 million.
