The American Hospital Association is preparing to sell its stock in MMI Cos. for a huge profit, paving the way for the Chicago-based hospital trade group to acquire one or more new businesses.
The AHA acquired its nearly 950,000 shares of MMI stock when it sold its liability insurance company to the Deerfield, Ill.-based risk management company last year. MMI bought Health Providers Insurance Co. from the association for $33 million: $15 million in cash and $18 million in stock.
Initially, the AHA said it would hold onto the stock for a long-term investment but later said it was shopping around for as many as four companies, which it would buy for as much as $40 million total (Jan. 1, 1996, p. 2).
Over the past seven months, AHA executives downplayed the association's aggressiveness in seeking out new businesses whose products and services the AHA could market directly to its 5,000 hospital members. But the pending stock sale indicates the AHA may be ready to buy.
"There is no timetable on when we'll acquire something," said Richard Wade, the AHA's senior vice president for communications. "But an acquisition will be in close proximity to the sale of the stock."
The sale of the stock is expected to occur by the end of the year.
Wade said the AHA has identified three types of companies out of an original list of 11 that the association is targeting for acquisition, but he declined to name the three. The AHA's stated areas of interest include printing and publishing, data/information systems, third-party administrators, physician recruitment firms, market research firms, education/training services, temporary health service providers, real estate managers and insurance brokers.
The AHA's divestiture of its MMI stock will be part of a larger sale of common stock by MMI. On Aug. 8, MMI filed a registration statement with the Securities and Exchange Commission for a proposed offering of 2.2 million shares of MMI common stock. Of that, the AHA owns 949,760 shares, or 43%.
The price of MMI common stock, which trades on the New York Stock Exchange, closed at $33.13 per share Aug. 14. That puts the value of the AHA's stake at about $31.5 million, a 74% increase in the value of the original $18 million worth of stock the AHA received from MMI.
In related AHA news, the association reported a summary of its 1995 financial results last week. The AHA said its annual revenues dropped 3.5% to $83.4 million last year, while expenses dipped 3.4% to $82.4 million. Profits, consequently, slipped to $1.1 million last year from $1.2 million in 1994. The figures do not include dividends from the AHA's for-profit subsidiary.
The AHA also reported that association President Richard Davidson's compensation climbed 9% last year to $603,588 from $553,141 in 1994.
A more detailed breakdown of the association's revenues, expenses and compensation will be available shortly when the AHA files its annual tax return with the Internal Revenue Service. Last year, the AHA stopped publicly releasing its audited financial statements.