Shareholders will vote on the merger of OrNda HealthCorp, Summit Health and American Healthcare Management on April 19, according to OrNda's registration statement filed last week with the Securities and Exchange Commission.
The statement, which had been delayed within the SEC, now clears the way for the merger of three turnaround hospital companies. OrNda emerged from bankruptcy protection in the late 1980s. AHM was forced by lenders to file for bankruptcy in 1987 and emerged under new management two years later. Summit also weathered serious financial problems.
The merger will create the nation's fifth-largest investor-owned hospital chain with 47 hospitals. The statement said the companies' combined revenues for the year ended Aug. 31, 1993, would have been $1.5 billion had they been a single company.
A turnaround and potential merger can mean good news for investors. That's especially true for Nashville, Tenn.-based OrNda, whose March 16 share price of $18.63 was up 46% from its price on Dec. 1, 1993, when the merger was announced. OrNda stock trades on the NASDAQ market.
The run-up in stock price has been especially sweet for Joseph Littlejohn & Levy, a New York-based venture capital firm that invested $55 million in 1990 shortly after OrNda-then called Republic Health Corp.-emerged from bankruptcy. That investment is now worth $132 million, according to the registration statement.
Partner Paul Levy said he expects OrNda to be an "even more significant force in the industry." Although the company is considered heavily leveraged, he said it could issue more stock if it needs more capital to grow.
OrNda's debt as a percentage of capitalization, now at 77.5%, will drop to 72% after the merger, according to the registration statement.
The registration statement also said that Steve Volla, American Healthcare's president and chief executive officer, hadn't yet signed a management contract with the new company.
Last week, Mr. Volla, who will continue to work from his offices in King of Prussia, Pa., said "that reflects OrNda's practice of not having management contracts" except for top executive Charles Martin, OrNda's chairman, president and CEO.
Still, the details of Mr. Volla's responsibilities haven't been decided. "There's still an awful lot of planning going on," he said.