Apria’s Head Steps Down at Board’s Urging
Orange County developer George L. Argyros resigned as chairman of Apria Healthcare Group Inc. at the request of fellow board members of the struggling home health-care company.
Argyros’ resignation came after directors grilled him about his disclosure earlier this week that he may lead an effort to take over Costa Mesa-based Apria.
Directors suggested that Argyros step down after questioning the timing of his disclosure, which came about two weeks after Apria’s stock hit an all-time low of $8 a share, sources said. Argyros also has said repeatedly that he opposed the sale of the company.
“This was a 180-degree turn,” one source said. “For the past six months, George has vigorously argued that this was the wrong time to sell the company because it was too cheap. Now suddenly it’s the right time, as long as he’s buying it.”
Argyros resigned Tuesday, but the move wasn’t announced until Wednesday. He declined to be interviewed, but said through a spokesman that he indicated before Tuesday’s meeting that he would take whatever steps were necessary to avoid appearances of a conflict.
Argyros, the largest individual shareholder with a 5.4% stake, will remain as a director. Ralph V. Whitworth, an executive with the company’s largest investor, Relational Investors, was named chairman. Relational Investors holds 5.1 million shares, or a 9.9% stake. Whitworth joined the board in January.
The move further muddled the company’s attempts to redirect itself, which began last June when it hired Goldman Sachs & Co. to explore alternatives, including a capital restructuring or an outright sale of the company.
About 40 parties expressed interest, including Transworld HealthCare Inc., which offered to buy the company in a deal it valued at $18 a share, including $13 in cash. Coram Healthcare Corp. also entered a bid it valued at more than $16 a share in cash and stock.
The board rejected both offers. A source said directors questioned whether the offers were really worth as much as the bidders claimed.
Whitworth developed a reputation as an activist shareholder, first as an associate of T. Boone Pickens in the 1980s, and more recently as an advisor to Kirk Kerkorian in his investment in Chrysler Corp.
Whitworth, 42, said he started acquiring Apria shares in the last year when he saw a chance to strengthen a company stuck with a “dysfunctional board” and weak management.
Whitworth attributed much of the company’s financial troubles to a paralysis caused by indecision after it was created in the 1995 merger of two former Orange County rivals, Homedco Group Inc. and Abbey Healthcare Group Inc. Whitworth said the board for years was split evenly between directors with ties to Abbey and those with ties to Homedco.
Earlier this year, Apria struck a deal with Joseph Littlejohn & Levy of New York, which agreed to invest $172.2 million in the company. But the deal unraveled, leaving Apria to form a three-person committee, including Argyros, to sift through other alternatives.
Argyros also resigned Tuesday from the committee. He was replaced by another director, Terry Hartshorn, chairman of Pacificare Health Systems Inc.
Apria now faces the challenge of righting its operations at the same time it is looking for ownership stability.
The company also reported Wednesday that it lost $6.6 million, or 13 cents a share, for the first quarter. Analysts had expected Apria to report a small profit.
Whitworth said the company is on the mend, however.
“This company is not financially distressed,” he said. “We just renewed our bank credit facility through the year 2001 and generated strong cash flows in the first quarter.”