Shares of Apria Healthcare Group Inc. tumbled 21% Wednesday after the besieged home health care company disclosed that a major cash infusion from a New York investment house is in jeopardy.
The stock dropped $2.31 a share to $8.88 on the New York Stock Exchange. Nearly 1.85 million shares changed hands, triple the average daily volume.
Apria said late Tuesday that it is suing Joseph Littlejohn & Levy, alleging the investment house and its partner were refusing to go through with a $172-million investment in the Costa Mesa company without significant revisions in their deal.
A Littlejohn spokesman said Wednesday his firm believes the lawsuit is "without merit."
Analysts said that Apria, which lost $273 million last year, will be under pressure to resolve its financial and management uncertainties to restore shareholder confidence.
"They're going to have to reevaluate what to do," analyst Charles Campbell said. "But the market's going to look for quick, decisive answers."
The agreement with Joseph Littlejohn and its partner, an affiliate of Canadian Imperial Bank of Commerce, had capped months of uncertainty over the future of Apria, which is involved in a major restructuring.
Apria's board plans to meet Tuesday to discuss possible measures, including finding a new investor and the ongoing search for a new chief executive. Potential investors have contacted the company in the wake of the failure of the Littlejohn agreement, one director said.
"We're going to spend an enormous amount of time over the coming days focused on this situation," board member Ralph V. Whitworth said. "The company has a lot of alternatives available to it. I would expect we would seize on something in the near term."
Apria, the nation's largest home health care concern, has faced a variety of problems in recent years, including unprofitable business ventures amid rapid industry changes. In January, the chief executive resigned along with two other executives. The ongoing uncertainty, topped by Apria's announcement of the lawsuit, has shaken investors, analysts said.
The lawsuit could make it difficult for Apria to find another investor, said Sharon Corr, an analyst with Merrill Lynch Global Securities. "Typically, companies don't sue the other company," she said.
Whitworth, however, said the legal action won't hurt the company's chance to attract other investors. "It won't take more than 10 minutes for people to understand why we did what we did," he said.
The proposed deal with Littlejohn called for the investment group to pay $172.3 million for 12.3 million shares of Apria common stock and warrants to buy an additional 5 million shares, giving the investment group a 26% stake in the company.
Apria had planned to use the money to buy back up to 17.3 million shares of its common stock, bolstering the stock price for shareholders who wanted to sell shares.
In the lawsuit, Apria is seeking unspecified damages for what it says is a breach of contract.
Apria was created in 1995 from the merger of Abbey Healthcare Group Inc. and Homedco Group Inc.
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Apria Stock Drop
Apria Healthcare Group's stock was hit by a wave of selling Wednesday after the company disclosed that an investment firm is refusing to provide crucial funding. Weekly closing stock prices and Wednesday's close: $8.88
Source: Bloomberg News