Apria Healthcare Group, a Costa Mesa, Calif.-based home-care company, is looking for a way out of a merger agreement with Vitas Healthcare Corp., the nation's largest hospice provider.
Citing concerns with the recent decline in its own stock price, Apria announced it initiated discussions last week with Vitas to explore alternatives to a merger agreement the two companies signed June 28.
The agreement called for Apria to purchase Miami-based Vitas in a $212 million transaction structured as a pooling of interests.
Lawrence Smallen, Apria's chief financial officer, said the two companies are discussing other business relationships, such as a partnership or strategic alliance, that would result in a mutual termination of the merger agreement.
If the companies cannot agree on an alternative, Smallen said, the merger agreement contains certain termination options. For example, he said, either party can back out if the closing price of Apria common stock on the day prior to the merger close is less than $22.13.
The merger was expected to close at the end of this month. Apria's stock closed on the New York Stock Exchange at $20.25 on Nov. 6, the day the company announced its plans to terminate the merger. Vitas is a private company.
Apria's stock price has fallen from about $32 per share at the time it entered the merger agreement to as low as $17 per share, Smallen said.
In addition to its eroding stock price, Apria attributed its desire to terminate the merger to its slower- than-expected revenue growth for fiscal 1997.
Apria recently announced third-quarter earnings that fell slightly below analysts' expectations, primarily as a result of a nationwide conversion of the company's information systems (Nov. 4, p. 10).
Apria said it wants to focus on its core businesses. Smallen identified these as respiratory therapy, home infusion and home medical equipment.
While the hospice care provided by Vitas offers "some synergies" with Apria's home-care services, Smallen said they are not enough to outweigh other concerns. He said the companies should reach a decision on how to proceed in the next few months.
Vitas officials declined to comment on the discussions.