Emeritus Protests Sale of ARV Stock

Seattle-based Emeritus Corp. escalated its hostile bid to acquire ARV Assisted Living Inc. in Costa Mesa, asking the American Stock Exchange on Monday to investigate a recent move that allowed an ARV ally to increase its stake in the company.

Emeritus, which for two months has fruitlessly pursued a bid to acquire ARV for $16.50 a share, challenged a move by ARV’s board to allow an affiliate of New York investment house Lazard Freres & Co. to redeem $60 million in convertible notes for ARV common stock.

Emeritus said it believes the transaction violated an Amex rule requiring companies to get shareholder approval before selling 20% or more of their stock to another party at a discount to the market price.

In the weeks since ARV and Lazard agreed to the debt conversion, Amex-listed shares of ARV have ranged from $14 to $15.375.

ARV said the Lazard Freres affiliate paid $17.25 a share for the 4.3 million shares it acquired, giving it a 39.1% stake in ARV. But Emeritus said the price, when including a 23.2% “redemption premium” on behalf of the affiliate, is actually $14 a share. Emeritus last week filed a suit alleging the Lazard deal doesn’t allow shareholders to seek a fair market price for their stock.

ARV executives weren’t available for comment.