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Apria Health seeks a cure
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January 19, 1998: 11:21 a.m. ET
Executive suite cleared, loss projected after rough transition through merger
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NEW YORK (CNNfn) - Apria Healthcare Group Inc., the nation's largest home health-care company, has cleared out its executive suite, acknowledging that operating results will be weaker than expected.
The Costa Mesa, Calif.-based company said Monday that Jeremy Jones has resigned, effective immediately. In addition, Lawrence Smallen has resigned as chief financial officer and Jerome Lyden is departing as senior vice president of sales.
Also, the company said it expects to report a 1997 loss of $2.20 to $2.40 a share, excluding the impact of one-time charges for intangible assets.
Apria -- which was formed by a merger between Abbey Healthcare Group and Homedco Group -- represents a good opportunity to reflect on a merger that didn't turn out as planned, analysts said.
The two home health-care providers had good reasons to join forces in 1995. "They had complementary geographic clusters ... they were willing to divide up the business," said Sheryl Skolnick, analyst at BankAmerica Robertson Stephens.
But Abbey's former chief executive Timothy Aitken increasingly grew discouraged by conflicts with Jones. Months after completion of the merger Aitken resigned, leaving Jones (who came from the Homedco side of the management ranks) in charge of the business.
"I think that led to the inability [of Apria] to set a strategic course for itself," Skolnick said.
As a result of the transition, Apria's management and sales force were dominated by ex-Homedco personnel. The company subsequently lost contracts and big customers.
Since 1996, Apria's stock price has lost more than half of its value. The stock (AHG) closed Friday at 11-1/2, up 1/2.
In 1997, Aitken re-emerged into Apria's corporate landscape. Now as chief executive of Transworld Healthcare Inc., Aitken joined with former Salomon Brothers trading legend, Lewis Ranieri to structure a $900-million bid for the scaled-down Apria.
However, the offer, valued at $14 per share in cash and $4 in stock, was never accepted. "Basically, I don't think that was a deal that in a million years Jerry Jones would have taken," BankAmerica's Skolnick said.
In a statement, Apria said the chief executive duties will be assumed by Lawrence Higby, president and chief operating officer. The position of chairman will be assumed by George Argyros, Apria's largest individual shareholder.
In addition, Apria has formed an executive committee, which Argyros will chair, to review the company's by-laws, including the size and composition of the board.
Argyros said the board is nearing completion of its review of strategic alternatives, initiated with the assistance of Goldman Sachs & Co. last June.
-- by staff writer Robert Liu
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