$1.45-Billion Offer Made for O.C.'s Apria Healthcare

By JAMES S. GRANELLI

Oct. 14, 1997 12 AM PT

TIMES STAFF WRITER

COSTA MESA —

Former Apria Healthcare Group Inc. executive Timothy M. Aitken and a major New York investor Monday made an unexpected bid of $1.45 billion in cash and stock for the troubled home health care company.

Aitken’s Transworld HealthCare Inc. in New York and its 70% owner, Hyperion Partners, said in a letter to the Apria board that they would pay $14 in cash and $4 in stock for each share of Apria, one of the nation’s largest home health care companies.

The offer bypassed the process that Apria had set up last spring when it hired investment banker Goldman, Sachs & Co. to find a merger partner or some other financial help.

Hyperion’s managing partner, Lewis S. Ranieri, said in the letter that his group has “the necessary debt and equity financing standing ready” to commit to the deal quickly.

Though unexpected, the offer for the Costa Mesa company is friendly, said Transworld spokeswoman Susan Lewis. “This is a newly formulated proposal that went directly to the [Apria] board,” she said.

She would not elaborate on the Hyperion-Transworld offer, saying it was too soon to discuss how the companies would be merged, where it would be headquartered and how many employees, if any, would be laid off.

Industry analysts say the proposal is expected to accelerate the bidding process. But Apria said it has nearly completed its review of some 30 plans brought in by Goldman.

“We expect to have some indication of the type of transaction we’ll do by later this month or early November,” said Apria spokeswoman Sheree Aronson. The company will consider the Hyperion-Transworld offer as well, she said.

Apria was itself forged in the 1995 merger of Abbey Healthcare Group Inc. and Homedco Group Inc., but it has yet to reap the benefits from that merger, and shareholders are complaining.

Beset by breakdowns in its collections systems, unprofitable business ventures and rapid changes in its industry, Apria took a $95-million charge in the second quarter and posted a $50.6-million loss for the first six months.

Its stock, trading above $22 a share in November, dropped to a 12-month low of $12.75 two weeks ago. It has climbed since, closing Monday at $16.25 a share.

Ironically, said Tom Burnett of Merger Insight in New York, Apria has improved its financial condition, “made all the right moves,” at a time it is likely to be sold. Indeed, the company has projected third-quarter profits of 31 to 37 cents a share.

Apria, with more than 8,200 employees, provides home health services from 350 locations in all 50 states. Its revenue was $1.2 billion last year.

Transworld has 400 employees providing outpatient and home health care services mainly in the New York-New Jersey region. It also provides medical supplies and mail-order pharmaceuticals. Its revenue was $76.3 million last year.

Aitken’s involvement drew mixed reactions from industry experts, who recall that he left Apria five months after the merger and ended up with total compensation that year of $5.5 million.

“He lends more credence to the bid,” Burnett said. “This won’t be a minnow swallowing the whale because you’ve got somebody who knows the company well. He knows where the skeletons are.”

But Aitken’s presence has some wondering if it’s an opportunity or his ego that is driving the proposal. Aitken had been chairman and president of Abbey before the merger but lost out as chairman of Apria to Homedco’s top executive, Jeremy M. Jones.

“You’ve got to wonder just how much ego is playing a part in this,” said Ann Logue, an analyst at Volpe Brown Whelan in San Francisco.

The proposal, along with an increase in new investors seeking a quick return, should help push Apria directors to sell the company rather than come up with capital to remain independent, she said.

Burnett, who consults with major institutional investors, said those investors are worried that Goldman Sachs and the company will try to raise capital and remain independent.

“Apria is at a point in the process where other bidders would have enough information about the company to respond,” Logue said. “This bid speeds up the process, and new bidders should surface quickly.”

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

Apria Offer

Transworld HealthCare is offering $1.45 billion for Apria Healthcare Group. Details on the two firms:

Apria Healthcare Group

* Headquarters: Costa Mesa

* Chairman/CEO: Jeremy M. Jones

* Business: Home health care products and services

* Employees: 8,255

* Status: Public

* Exchange: NYSE

* 1996 net sales: $1.2 billion

* Monday’s stock close: $16.25