Determined to shore up its home infusion division to rival that of Caremark International and Coram Healthcare Corp., W.R. Grace has signed a definitive agreement to purchase Home Nutritional Services in a deal valued at $110 million.
If completed, the agreement would create the nation's third-largest home infusion company. Northbrook, Ill.-based Caremark and newly formed Coram, which has yet to select a headquarters, are the nation's first- and second-largest home infusion providers, respectively.
Under terms of the agreement, Grace subsidiary National Medical Care will purchase all 11.5 million shares outstanding of Home Nutritional stock in cash for $7.85 per share.
Also, Marietta, Ga.-based home-care company Healthdyne, which owns 68% of Home Nutritional stock, separately agreed to tender its 7.8 million shares to Grace to complete the purchase. In return, Healthdyne will receive $60 million in proceeds for its Home Nutritional stock.
The deal, which has been approved by the board of directors at Home Nutritional, remains subject to antitrust and other regulatory approvals.
John Anderson, president and chief executive officer of Home Nutritional, will remain at the helm of the company through the transition, a company spokesman said. It hasn't been determined whether he will stay on with National Medical Care after the deal is completed. Mr. Anderson has been HNS' president and CEO since July 1992.
HNS' stock rose $1 to $7.75 during over-the-counter trading on March 4, the day of the announcement, while Healthdyne's stock, which is also traded over the counter, rose 63 cents to $8.25 per share. Grace's common stock dropped 13 cents to $43 per share in New York Stock Exchange trading.
Home care industry analysts said the deal makes sense from both sides. Grace had been in the home infusion acquisition market for several months. It was one of the seven companies that reportedly reviewed the financial records of Medical Care America before that company decided to sell Critical Care America to Caremark International for $175 million in cash (Jan. 24, p. 6).
Last year, Grace purchased an 85% interest in North Miami Beach, Fla.-based home infusion provider Home Intensive Care for about $112 million (April 26, 1993, p. 8).
From an industry standpoint, the deal is just another example of home infusion providers' "urge to merge."
"Home infusion is a large and important (segment within healthcare), but it's also consolidating," said Craig Dickson, a healthcare investment analyst with Interstate/Johnson Lane, Charlotte, N.C. "The Critical Care/Caremark deal and (the creation of) Coram Healthcare Corp. is clearly an indication that the powers that be have decided you have to be big in this business to be competitive."
Peter Spears, president of Grace subsidiary NMC Homecare, agreed, saying the deal will improve Grace's chances of successfully competing in the managed-care market. Adding HNS also introduces the company to 15 new markets nationwide. NMC Homecare now operates in 100 markets nationwide.
Grace said its operating income for its healthcare division during the fourth quarter ended Dec. 31, 1993, rose 33% to $42.3 million, compared with $31.7 million during the year-ago period.
For fiscal 1993, operating income for its healthcare division rose 35% to $142 million, compared with $105 million in 1992. Its healthcare division includes all dialysis services as well as home care.