After months of searching for a potential buyer, T2 Medical found three of them last week as it agreed to merge with home infusion providers Curaflex Health Services, HealthInfusion and Medisys in a stock deal valued at $550 million.
The new company, which will operate under the name Coram Healthcare Corp., will post annual revenues of $500 million and become the nation's second-largest home infusion provider, behind Caremark International.
Under the merger agreement, all shares of T2's common stock will be exchanged for 0.63 shares of common stock of the newly formed company. Ownership of Coram will be 67% for T2 shareholders, 13% for Curaflex, 12% for HealthInfusion and 8% for Medisys. The merger will be accounted for as a "pooling-of-interests" for financial reporting purposes and is intended to be treated as a tax-free reorganization for federal income tax purposes, executives said.
The merger is subject to shareholder and regulatory approval, including antitrust clearance, and is expected to be completed by the end of the second quarter of 1994.
Charles Laverty, Curaflex's chairman and chief executive officer, said his company began negotiating with T2 after the initial merger between Curaflex, HealthInfusion and Medisys was announced Dec. 3; that deal was worth about $217 million. The three home infusion firms initiated talks with T2 about joining the merger, he said.
Mr. Laverty will become president and CEO of the new company, while T2 President Tommy Carter will be named vice chairman. Thomas Haire, T2's chairman, will have no official role within the company, Mr. Laverty said. Miles E. Gilman, president and CEO of HealthInfusion, and William J. Brummond, CEO of Medisys, will retain active roles within the management of the new company. Coram will name a chairman for the company within the next two weeks, Mr. Laverty said.
Sources said James M. Sweeney-who resigned last week as chairman and CEO of McGaw, an Irvine, Calif.-based intravenous supply company-is a leading candidate for the position.
Mr. Sweeney's name is well-known among home infusion providers. He formed Caremark in 1978 before selling it to Baxter International in 1987 for $586 million. The company was spun off from Baxter in 1992. More recently, Mr. Sweeney had served on the board of directors at Medical Care America before resigning from his position in December (Dec. 13, 1993, p. 10).
Mr. Sweeney couldn't be reached for comment.
For T2, the deal closes the book on its controversial physician-ownership arrangements that had once generated millions in revenues for the Alpharetta, Ga.-based company. However, those same arrangements also prompted an investigation by HHS during the summer of 1992.
In 1993, T2 sharply restated its earnings downward after the discovery of a series of accounting errors recorded during the first half of its fiscal year. That apparently prompted the resignation of its CEO, Joseph Allegra, M.D., and a subsequent investigation into the matter by the Securities and Exchange Commission.
Late last month, MODERN HEALTH-CARE reported that T2 co-founders Tommy Carter and Thomas Haire had been seeking buyers for the company. Homedco and Abbey Healthcare Group were among the companies that had viewed T2's non-public financial records (Jan. 31, p. 10).
Adding T2 to three regional home infusion companies has transformed Coram from a mid-sized company into a major competitor, one that will be mentioned in the same breath as Caremark.
"Being a smaller to mid-sized company in home infusion makes it much more difficult to attract new business," said Randall Huyser, a healthcare analyst at Furman Selz, San Francisco. "(Coram) is going to operate more along the line of Curaflex-competing for managed-care contracts."
Company executives chose the name Coram, which is Latin for "together, face-to-face publicly, openly."They haven't determined where the new corporate eadquarters will be located.
T2's stock rose by 13 cents to $8 in trading on the New York Stock Exchange on Feb. 7, the day of the announcement. Ontario, Calif.- based Curaflex's stock decreased by 6 cents to $5.63, Miami-based HealthInfusion's stock fell 88 cents to $6.13 and Minneapolis-based Medisys dropped 6 cents to $3.50 all during over-the-counter trading Feb. 7.