Apria Stock Falls 20% a Day After Shake-Up
Apria Healthcare Group Inc. shares fell 20% Tuesday, a day after the company said the chief executive and two other top managers will step down and warned that earnings will be below analysts’ estimates.
The home health care company’s stock fell $2.25 to $9.25 a share in heavy trading. Earlier in the session, the stock slumped to $8.38, a 52-week low, before recovering a bit. Nearly 1.5 million shares changed hands, nearly six times higher than the average daily volume of about 254,000 shares the last three months.
The company surprised analysts and investors by announcing Monday it would take a fourth-quarter charge in excess of the $10 million to $15 million it previously cited.
“We didn’t expect these charges or the operating results to be as poor as they are,” said Sharon Corr, an analyst at Merrill Lynch Global Securities. “They have had operating problems for over a year, and those issues aren’t being as quickly resolved as we would have expected. This has been a long process.”
With management in turmoil and the home health care company posting lower-than-expected earnings for the fourth quarter and the year, the board might feel the need to accept offers it previously would have rejected, analysts said.
One potential buyer, Transworld HealthCare Inc. said it recently revised its December offer to acquire Apria for $1.45 billion cash, stock and assumed debt, or $16 a share. The new proposal--for $18 a share, $13 of it cash--is under review by Goldman, Sachs & Co., the investment bank Apria hired in June to help explore strategic alternatives, including selling the company.
Apria spokeswoman Sheree L. Aronson said an announcement regarding the company’s review of its options could come “fairly soon.”
Transworld Chairman Timothy M. Aitken, who left Apria after helping engineer the creation of the company by merging two Orange County competitors, blasted Apria’s lack of action on the offer.
“I don’t think they’re treating [our offer] with the seriousness it deserves,” Aitken said Tuesday evening. “I don’t know whether personal agendas are ruling the day instead of shareholders’ interests, but we believe that shareholders’ interests should come first.”
He questioned the management changes announced Monday. Jeremy M. Jones resigned as chairman and chief executive officer, and President Lawrence M. Higby was named interim CEO. Aitken contended that the management team, except for Higby, is much the same as the one “that has been running this company for the last two years.”
Apria said Chief Financial Officer Lawrence Smallen, 48, will resign when his successor is found. The duties of the third departing executive, Jerome Lyden, 41, senior vice president of sales, already have been assumed by Dennis Walsh, 47, executive vice president of sales.
Apria’s largest shareholder, a fund headed by veteran corporate activists Ralph Whitworth and David Batchelder, also said Tuesday that the company’s organizational changes don’t go far enough.
Relational Investors, based in La Jolla, believes that the structure of the home health company’s board is a root cause of many of its recent problems. The firm, which owns just under 10% of Apria shares, is seeking two seats on the board and may mount a proxy fight if its demand isn’t granted.
In its announcement Monday, Apria said it was establishing a committee of board members to consider structural changes on the board. But no changes were adopted immediately.
The company’s inability to react swiftly to its financial problems, and to decide its future direction, may be due to its unusual board structure, a legacy of the 1995 merger of competitors Homedco Group and Abbey Healthcare Group. The merger called for each predecessor company’s board to appoint four directors to Apria, a split that the bylaws have perpetuated.
