Emeritus Will Take ARV Bid to Shareholders

After being rejected in its attempt to buy ARV Assisted Living Inc., a Seattle-based company announced Tuesday that it will take its buyout bid directly to shareholders of the Orange County retirement home operator.

Emeritus Corp. said it plans to nominate a rival slate of directors to the nine-member ARV board at the Costa Mesa company’s annual meeting Jan. 8 in an effort to clear the way for a merger.

“Although ARV has been aware of our serious interest in pursuing a merger of ARV and Emeritus since June 1997, the ARV Board has refused to enter into discussions with us,” Emeritus said. “Nor has any other bidder proposed an acquisition of the company at a better price.”

Emeritus is calling for a special shareholders meeting on Jan. 16 to allow ARV shareholders to vote on their proposal.

ARV, which runs 49 assisted-living communities and is considered an important player in the industry, has been courted in recent months by Emeritus and an affiliate of the New York investment firm Lazard Freres & Co.

In mid-October, ARV rejected Emeritus’s offer to buy the company for $16.50 a share, saying it would stick with a previous plan to allow Lazard Freres to buy just under half the company for $14 a share, or $135 million. The deal would have required shareholder approval.

Then ARV announced late last month that, instead, it would sell $60 million in convertible notes to Lazard Freres, boosting the firm’s stake in ARV and building a potentially powerful alliance of ARV officers and directors with Lazard Freres. The notes are convertible into about 3.5 million shares of ARV common stock.

Emeritus, which operates assisted-living communities throughout the United States and in Canada, owns 9.3% of ARV.

Industry analysts said Tuesday that they were not surprised by the latest development and predicted that the tug-of-war for ARV will continue.

“Given ARV’s reluctance to hear the proposal from Emeritus, this was basically the only course of action that Emeritus had,” said Scott D. Mackesy, an analyst with Morgan Stanley Dean Witter. “It’s not over yet.”

ARV stock edged down 13 cents a share to $15.50 Tuesday on the American Stock Exchange.