A proxy contest staged by AmeriHealth's largest shareholder ended last week after the company agreed to pay shareholders an additional 8.5 cent cash dividend when it completes its merger with Champion Healthcare.
The settlement meant that Houston-based Champion could proceed with its planned $38 million acquisition of AmeriHealth, an Atlanta-based hospital company that had been searching for a merger partner.
Pittsfield, Mass.-based Lenox Healthcare, which owns 13% of AmeriHealth, had challenged the deal but said it now favors the merger.
AmeriHealth will be the surviving company, but the name will be changed to Champion.
Under the deal, AmeriHealth shareholders will receive one share of the combined company for every 5.70358 shares of AmeriHealth. The Nov. 3 AmeriHealth shareholders meeting in Atlanta will be rescheduled for later in the month, executives said.
Champion owns three hospitals and has agreements to buy four others in Ohio, Florida, Missouri and Louisiana.
The merger also has been sweetened in recent weeks by AmeriHealth's higher stock price. Earlier this month, Miami investor Albert H. Kahn bought 125,000 shares of AmeriHealth, saying he believed the stock was undervalued. The purchase increases his stake to 9.8% from 9%.
On Oct. 18, the day the settlement with Lenox was announced, AmeriHealth moved down 13 cents to $1.25 in American Stock Exchange trading. Even so, that's an improvement. Shares had been trading at $1 or less in August, before the acquisition by Champion was announced.
After meeting with AmeriHealth and Champion executives, Thomas Clarke, Lenox's president, said he was convinced that they were serious about expanding business rather than just staging a merger for financial gain. He noted Champion's recent flurry of acquisition announcements. In addition, he said he believed several hospitals may be sold as a result of the Columbia/HCA Healthcare Corp.-Healthtrust and the National Medical Enterprises-American Medical International deals.
Champion "is going to be the benefactor of a lot of divestitures," Mr. Clarke said.
As part of the agreement, Lenox's legal expenses of $250,000 will be paid, and Lenox can buy as much as 15% of the newly merged company.