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Apria seeks a panacea
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February 4, 1998: 11:51 a.m. ET
Nation's leading home health-care firm unveils $242 million recapitalization
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NEW YORK (CNNfn) - Apria Healthcare Group Inc. plans to replace most of its board as part of a $242-million recapitalization, the nation's largest home health-care company said Wednesday.
The announcement comes a month after the Costa Mesa, Calif.-based company cleared out its executive suite in the wake of weaker operating results.
At the core of the company's problems is the fact that Apria -- which was formed by a merger between Abbey Healthcare Group and Homedco Group -- has never fully realized any benefits from the deal, analysts said.
The latest proposal, which will be financed by two private New York-based investment funds including an affiliate of Canadian Imperial Bank of Commerce, also comes in light of overtures from a dissenting investor group interested in acquiring Apria.
Last year, a group including Transworld HealthCare Inc. and former Salomon Brothers trading legend Lewis S. Ranieri announced an $18-a-share, cash-and-stock offer. Transworld is headed by Timothy Aitken, the former chief executive of Abbey who left Apria shortly after the merger was completed.
In a telephone interview, Transworld said it is still interested combining with Apria. However, it is in the process of evaluating options including a possible proxy contest.
"Would Tim [Aitken] be interested? Absolutely. Is it something we'll pursue? We're reviewing it," said Greg Marsella, Transworld's general counsel.
Apria's latest proposal will require shareholder approval as well as approval from bondholders. An Apria spokeswoman tells CNNfn the recapitalization plan has the support of roughly 30 percent of outstanding shareholders.
"We had an inkling about today's announcement but we weren't notified prior to the release. We are in the process of evaluating it. We haven't reached a consensus regarding a possible proxy," Marsella said.
In a statement, Apria said it is proposing a tender offer for 17.3 million, or 33 percent, of its shares at $14 each. The repurchase will be funded by a $172.2 million equity investment from Joseph Littlejohn & Levy and CIBC WG Argosy Merchant Fund 2 LLC.
Under terms of the agreement, the funds will purchase 12.3 million Apria shares and warrants for 5 million shares exercisable at $20 a share. On completion, the two will own about 26 percent of Apria's outstanding shares.
Following the tender offer, the two funds will have three board seats. Apria's new chairman George L. Argyros, who is the company's largest individual shareholder with 2.7 million shares, or 5.4 percent, will remain on the reconstituted board along with Ralph V. Whitworth, who joined the board Jan. 27.
Whitworth is a principal and managing member of Apria's largest institutional shareholder, Relational Investors LLC, which controls 5.1 million shares, or 9.9 percent.
Another board seat is expected to be filled by a director endorsed by Franklin Mutual Advisors, which controls 4.4 million shares, or 8.6 percent.
In addition, one board seat is expected to be held by a new chief executive, to be selected before proxy materials are mailed in connection with an Apria shareholders' meeting. The remaining two board seats will be filled by individuals mutually agreed on by the two funds and the existing Apria board.
No dates have yet been set for the shareholder vote, tender offer or record dates.
-- by staff writer Robert Liu
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