Argyros Resigns as Chair of Apria Healthcare Board
In a rare setback for one of Orange County’s most prominent businessmen, developer George L. Argyros resigned as chairman of troubled Apria Healthcare Group Inc. at the request of fellow board members.
The move came after directors of the Costa Mesa-based company grilled Argyros about his disclosure Monday that he may lead a bid to buy Apria, one of the nation’s largest home health care providers.
Specifically, some directors are upset about the timing of Argyros’ disclosure, which came about two weeks after Apria’s stock hit an all-time low of $8 a share. Argyros, the company’s largest individual shareholder, 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 actually resigned Tuesday, but the company didn’t announce the move until Wednesday. He declined to be interviewed, but said through a spokesman that he indicated before Tuesday’s board meeting that he would take whatever steps were necessary to avoid appearances of a conflict.
The resignation of Argyros, who made a fortune as an apartment builder and went to own baseball’s Seattle Mariners and the AirCal airline, may prove to be only a temporary setback for the 61-year-old tycoon.
He still is expected to make a bid for Apria, and his resignation sets the stage for what could become a three-way battle for control of the company.
Apria also is considering two other possible deals--a merger with Denver-based Coram Health Care Corp. or a capital infusion from an investment group that includes Timothy M. Aitken, Apria’s former vice chairman.
Argyros, who made the Forbes 400 list of richest Americans in 1991, is smarting from his involvement with Apria. His 5.4% stake, worth $91.7 million in June 1996, had shrunk to $26.3 million by Wednesday.
That type of steep downturn is rare for Argyros, who manages many of his investments through Westar, a Costa Mesa investment company he formed with venture capitalist Chuck Martin.
“Westar never lost money in a deal and has had a record of very good investment performance,” Martin, managing director of Newport Beach-based Enterprise Partners, said Wednesday.
Investors appeared to be intrigued by the potential of a bidding war for Apria. The company’s shares gained 63 cents Wednesday, to $9.50, in New York Stock Exchange trading.
Westar’s first investment was in Homedco Group Inc., the Fountain Valley home health care company that merged with Abbey Healthcare Group Inc. in Costa Mesa in 1995 to form Apria.
In a recent interview with The Times, Argyros remembered having reservations about the merger.
“I didn’t know whether it was a merger that was really compatible, although they were in the same industry,” he said. “It proved out that the whole board should have been concerned about it because, as it turned out, it was not a good merger.”
Apria attempted to right itself last June, when it hired Goldman Sachs & Co. to explore alternatives, including a capital restructuring or outright sale of the company.
About 40 parties expressed interest, including Aitken’s Transworld Health Care Inc., which offered to buy Apria in a deal it valued at $18 a share, including $13 in cash. Coram also entered a bid, which it valued at more than $16 a share in cash and stock.
The board rejected both offers as directors questioned whether they really were worth as much as the bidders claimed.
Argyros, who remains on Apria’s board, is being replaced as chairman by Ralph V. Whitworth, an executive at Relational Investors LLC, Apria’s largest shareholder with a 9.9% stake.
Whitworth rose to national prominence in the 1980s as a shareholder activist, first as an associate of oilman-turned-corporate-raider T. Boone Pickens, more recently as an advisor to Kirk Kerkorian in his investment in Chrysler Corp.
Whitworth, 42, said he started acquiring Apria shares last year when he saw a chance to strengthen a company stuck with a “dysfunctional board” and weak management.
He attributed much of Apria’s financial troubles to a company paralyzed with indecision. The board of the new company was split evenly between directors from Abbey and 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 and Apria’s board formed a three-person committee, including Argyros, to sift through other alternatives.
Argyros also resigned from that committee on Tuesday. 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 that it looks 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.”
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Profile: George L. Argyros
Residence: Newport Beach
Company: Arnel & Affiliates, a collection of financial holdings including commercial real estate, venture capital, international telecommunications and health care
Education: Bachelor’s degree in business and economics, Chapman College (now Chapman University), 1959
Background: Grandson of Greek immigrants; born in Detroit and raised in Pasadena. Made his fortune in commercial real estate. Former owner of AirCal and Seattle Mariners baseball team. Active in Republican Party politics and local charities.
Board memberships: Chairman, Chapman University Board of Trustees; Cal Tech Board of Trustees; Orange County Boy Scouts of America; Apria Healthcare; Rockwell International; Estelle Doheny Eye Foundation; Beckman Laser Institute; Orange County Business Committee for the Arts and others
Awards: 1993 Horatio Alger Award
Sources: Arnel & Affiliates, Times reports
Times staff writer James S. Granelli contributed to this report.