Heathcare Services Firm Apria Up for Sale
Apria Healthcare Group Inc., one of the nation’s largest providers of home healthcare services, said Tuesday that it was soliciting potential buyers, sending its shares to a 10-year high.
The Lake Forest-based company, with $1.45 billion in annual sales, hired investment banking firm Morgan Stanley to discuss possible deals after several companies had expressed interest in acquiring it, said Chief Financial Officer Amin I. Khalifa.
“We take care of people when they leave the hospital, and that’s a growing field,” Khalifa said.
Apria executives believe the Orange County company’s shares are undervalued relative to competitors, Khalifa said. Apria shares, which over the last year cost as little as $26.25, soared nearly 17% on Tuesday’s news, rising $5.24 to $36.75. That values the company at $1.8 billion.
Apria said in February that its revenue was hurt last year by cuts in Medicare reimbursements for respiratory medication. The company also has struggled to absorb recent acquisitions and has had trouble controlling costs, said Jefferies & Co. analyst Arthur Henderson.
“Something’s not working right internally,” Henderson said. “This would be an attractive company for a financial buyer.”
Apria executives believe the company could embark on necessary changes more quickly as a private company before possibly going public again, Khalifa said.
In addition to private investment firms, Apria could draw interest from competitors and other types of healthcare firms, Khalifa said. He and other Apria executives declined to name potential bidders.
Last year, Apria met with Blackstone Group, Warburg Pincus, Madison Dearborn Partners Inc. and other investment firms about possibly buying the company and taking it private in a transaction valued at about $2 billion, the New York Post has reported.
Founded in 1995 through the merger of two Orange County-based rivals, Homedco Group Inc. and Abbey Healthcare Group Inc., Apria has grown through the acquisition of several mom-and-pop operators. Today the company is essentially tied with Clearwater, Fla.-based Lincare Holdings Inc. for leadership of the home healthcare field.
The company’s business is driven largely by the delivery of portable oxygen machines and other medical devices. Apria’s 1,000 respiratory therapists train patients -- most of whom suffer from asthma, emphysema or chronic bronchitis -- to use the oxygen machines.
Operating out of 475 branches, Apria’s 2,000 drivers deliver replacement oxygen tanks as well as other medical equipment, including wheelchairs, special commodes, hospital-type beds and machines that alleviate sleep apnea.
Apria serves more than 2 million patients a year and operates in all 50 states. It posted net income of $114 million in 2004 on sales of $1.45 billion. Two-thirds of its business comes from patients enrolled in managed-care health plans. The rest are covered by Medicare.
Apria employs more than 10,000 people, 2,200 of them in California. Khalifa said he anticipated that the company’s workforce would shrink if it was sold. But, he said, any eventual workforce target could be achieved largely through attrition.
Bloomberg News was used in compiling this report.
