N.Y. Firm Increases Stake in Costa Mesa-Based ARV
ARV Assisted Living Inc. said it sold $60 million in convertible notes to an affiliate of Lazard Freres & Co., allowing the New York investment firm to boost its stake in the elderly care company to 28.2%.
The transaction supplants an earlier agreement for Lazard to buy up to 49.9% of Costa Mesa-based ARV for $14 a share, or $135 million. That deal was subject to shareholder approval.
The transaction also lessens the chances that another ARV suitor, Seattle-based Emeritus Corp., will prevail with its $16.50-a-share bid that was rejected last month.
The notes are convertible into about 3.5 million shares of ARV common stock at $17.25 a share. Together with Lazard’s earlier purchase of 1.9 million ARV shares, the new investment would give it a total stake of 28.2%, potentially making the firm a powerful ally with ARV officers and directors, who control about 22% of the company’s shares.
ARV operates 49 assisted-living communities, mostly in California. It is one of the largest companies in the fast-growing elderly care industry, but it has been considered an attractive target. The field of competitors has been consolidating rapidly, and ARV needs cash to pay for its plans to expand.
In its most recent fiscal year, ARV lost $1.8 million on sales of $81.6 million.
ARV’s stock closed unchanged at $15 a share Friday in Nasdaq trading.
John J. Rydzewski, ARV’s newly appointed chairman, said in a prepared statement that the deal with Prometheus Assisted Living LLC, a Lazard Freres affiliate, “enhances our balance sheet, reduces the company’s cost of capital and improves our financial flexibility.”
Rydzewski, a New York investment banker, was named chairman this month when Gary L. Davidson stepped down as ARV’s chairman, chief executive officer and president. John A. Booty, ARV’s former president, was named temporary chief executive until a replacement can be found.
ARV announced its original deal with Lazard in July. Last month, Emeritus, a smaller long-term care company offered to buy ARV outright for $210 million, plus the assumption of $91 million in debt. Emeritus has accumulated 8.3% of ARV’s stock in open-market transactions.
In rebuffing the bid, ARV said the price was too low and there were too many uncertainties. Raymond Brandstrom, Emeritus’ president, said the offer is still on the table.
Bloomberg News contributed to this report.
