Focusing its operations on its long-term-care business, Beverly Enterprises is selling its institutional pharmacy unit to Capstone Pharmacy Services for $862.5 million in stock and assumed debt.
When the acquisition of Beverly's Pharmacy Corporation of America unit is completed, Baltimore-based Capstone will become the nation's largest institutional pharmacy company with 100 sites in 32 states.
Fort Smith, Ark.-based Beverly is the nation's largest long-term-care provider with more than 600 skilled-nursing, rehabilitation, outpatient therapy, assisted-living, hospice and home-care centers nationwide.
For Beverly, the agreement allows it to unload a troubled unit. Beverly had cited difficulties in consolidating the operations of the unit during 1995 as a drag on company earnings.
In May 1995, Beverly had to put a hold on its plans to spin off at least 80% of the unit as a dividend to shareholders. The unit did not start meeting the company's financial expectations until 1996 after significant turnaround efforts, including the appointment of a new president.
"This transaction provides a very satisfying return on the investments we've made to build PCA," said David Banks, Beverly's chairman and chief executive officer. "We'll now be able to focus even more sharply on maximizing profitable growth within our core business."
Under the deal, Capstone will issue about 50 million of its shares, valued at about $587.5 million, to Beverly shareholders. In addition, Capstone will assume $275 million of PCA's debt.
After the deal closes, Beverly shareholders will own about 57% of Capstone. But Beverly Enterprises will not retain any ownership stake in it.
The transaction is subject to shareholder approval and federal tax and antitrust clearance. It is expected to be completed by year-end.
The deal comes less than a year after another long-term-care company, Atlanta-based GranCare, sold its pharmacy business to Vitalink Pharmacy Services of Naperville, Ill., in a similar transaction (Sept. 9, 1996, p. 24).