Owings Mills, Md.-based Integrated Health Services last week agreed to buy RoTech Medical Corp., an Orlando, Fla.-based home-care company, for $915 million.
RoTech, one of the nation's largest providers of home respiratory services, primarily serves small cities and rural areas. It operates 600 offices in 34 states and expects 1997 revenues of $440 million.
Its RoTech Oxygen and Medical Equipment subsidiary recently agreed to pay the government $612,500 to settle allegations of Medicare billing fraud. RoTech has denied wrongdoing (See story, this page).
IHS operates more than 1,000 facilities providing post-acute services in 41 states. For 1996, the company reported net income of $46 million on total revenues of $1.4 billion.
Combined, the companies will provide home care at more than 975 sites and other post-acute services at 1,500 sites in 43 states. They expect pro forma annual revenues of $2.3 billion and home-care revenues of more than $1 billion.
"This transaction allows us not only to greatly expand our network of home respiratory and home infusion services, it also propels our geographic expansion into rural markets," said Robert N. Elkins, M.D., IHS chairman and chief executive officer. "The current IHS home-care operations are primarily home nursing and rehabilitation care. A more diversified home-care network will be advantageous to our patients and managed-care payers."
The transaction includes $615 million in stock and $300 million in assumed debt and other financial obligations.
Under the agreement, IHS will issue 0.58 shares of IHS common stock for each share of outstanding RoTech common stock. RoTech stockholders will receive $22.61 worth of IHS common stock for each RoTech share.
IHS plans to issue 15.8 million shares of common stock at the deal closing, which is expected in the fourth quarter of 1997.
The agreement has been approved by the boards of both companies and now is subject to the approval of the companies' stockholders, IHS' senior lenders and government regulators.
Stephen P. Griggs, president and chief operating officer of RoTech, and his management team are expected to remain with IHS after the transaction.