After nearly tripling in size last week, OrNda HealthCorp finally is getting some attention on Wall Street, as two investment banking firms put out "buy" ratings on the company's stock.
"There wasn't much to (OrNda)" prior to last week's $575 million merger with American Healthcare Management and Summit Health, said James Baker III, a healthcare analyst with Equitable Securities Research, Nashville, Tenn. "These acquisitions have made them a player."
Until about a week ago, only one equity analyst, Jeff Villwock of New Orleans-based Johnson Rice & Co., followed the company. Mr. Villwock began tracking OrNda-then called Republic Health Corp.-after it emerged from bankruptcy reorganization in 1990.
Now, he is joined by Equitable and New York-based Merrill Lynch & Co. in recommending the stock, which is traded over the counter.
Also, Moody's Investors Service, the New York-based credit-rating agency, last week upgraded the rating on OrNda's senior subordinated debt to B2 from B3.
The action came after shareholders last week approved the merger of OrNda with King of Prussia, Pa.-based American Healthcare and Burbank, Calif.-based Summit to create the nation's fifth-largest investor-owned hospital chain, with two psychiatric facilities and 46 acute-care hospitals in 17 states (See map).
The company will have annual revenues of $1.6 billion. Its most significant presence will be in the Los Angeles area, where it owns 14 hospitals, but analysts look for the company to build networks in other cities.
Noting that OrNda has about $270 million in unused borrowing capacity, Johnson Rice's Mr. Villwock speculated that the company will make additional acquisitions and swaps.
In a somewhat surprising move, Steve Volla, chairman, president and chief executive officer of American Healthcare, declined to join OrNda's board. When the merger was announced, Mr. Volla's role was said to be chairman of the executive committee. However, as recently as last month, Mr. Volla's management responsibilities were undetermined.
Mr. Volla said he opted to cut his ties with OrNda so he can pursue his own interests in healthcare. OrNda "has a lot of depth of management....There was no reason to have three CEOs," he said.
Summit's president and CEO, Donald J. Amaral, is chief operating officer of OrNda and has joined the 11-member board.