Apria Expected to Announce New Investor Money, Board Reshuffle
Apria Healthcare Group Inc., pressed by investors to sell, is expected to announce today a deal that will raise $172.2 million in new investor money and restructure the board of directors.
The transaction, if signed today and approved by shareholders, would end more than six months of speculation over the future of the nation’s largest home health care company.
It also would change the board’s make-up to include representatives from the two new investor groups and from two major institutional shareholders that had urged the company to be sold.
“I’m very enthusiastic about the company’s future,” said George L. Argyros, 60, the company’s chairman. “I’m looking forward to working with the new board.”
Under the proposed agreement, unanimously approved by directors, Apria would recapitalize the company with $242 million from investor funds and an existing bank line of credit. It would use the money to buy back a third of the company’s stock in a tender offer at $14 a share.
The investors are two private New York investment funds, Joseph Littlejohn & Levy and CIBC WG Argosy Merchant Fund 2 LLC, an affiliate of Canadian Imperial Bank of Commerce.
Littlejohn and CIBC would buy 12.3 million new shares at $14 each and warrants that would allow them later to buy 5 million more shares at $20 each. After the tender offer, they would end up with 26% of Apria. Should they exercise the warrants, they would end up with 33% of the company.
Both funds are long-term investors in the health care industry. Littlejohn, for instance, has taken part in previous restructurings at Kendall International and OrNda Healthcorp.
Under the Apria plan, Littlejohn would fill two board seats with partners Paul S. Levy, 50, and David Y. Ying, 43. CIBC would name Jay R. Bloom, 42, one of its managing directors, to the board.
The plan allows shareholders who want out to sell at a higher price than they could get on Wall Street now. The stock has been trading in the $12 range, closing Tuesday at $12.38 a share, down 25 cents, in New York Stock Exchange trading.
It gives those with a longer-term interest a chance “to benefit from Apria’s significant potential for future returns,” said Ralph V. Whitworth, 42, who joined Apria’s board last week.
Whitworth is a principal of Apria’s largest institutional shareholder, Relational Investors LLC, which controls 9.9% of the stock. Upset with Apria’s slow efforts to improve, Relational Investors threatened a proxy fight if it didn’t get board seats. Whitworth would be one of the directors on the reconstituted board.
Also named to the board would be a director endorsed by Franklin Mutual Advisors Inc., the mutual fund run by often-vocal Michael Price. Two weeks ago, Franklin called on Apria to come to terms with one of at least two suitors that wanted to buy the company. Franklin owns 8.6% of Apria.
Argyros, the largest individual shareholder with 5.3% of the stock, would remain as a director, leaving it up to the new board to vote on a chairman. The company is searching for a new chief executive, and that person also would become a director.
The remaining two seats would be filled by individuals selected by agreement among Littlejohn, CIBC and the current Apria board.
Apria hasn’t been able to reap the benefits from the merger that created it in 1995. It has been beset by computer breakdowns in its collections systems, unprofitable business ventures and rapid changes in the industry. Besides cutting some staff and costs, it has fixed its computer system temporarily.
