COHR, a troubled provider of group purchasing and medical equipment services to hospitals, got new owners for Christmas. Its clients got some assurance that COHR will be around awhile.
Three Cities Research, a New York-based investment firm, made a complex offer to buy Chatsworth, Calif.-based COHR that is worth more than $5 per share, or at least $33 million.
Approved by COHR's board on Dec. 23, the deal was announced Christmas Eve. Although a tender offer to shareholders is open until Feb. 3, Three Cities is already assured of gaining control of the company, COHR said. On Dec. 23, Three Cities paid $15.8 million to two investors for a 48% stake in COHR. Company management also has pledged its holdings, about 2% of the stock outstanding, putting Three Cities over the 50% ownership threshold.
Three Cities plans to take COHR private, if it can buy at least 85% of the company's outstanding stock, according to a Securities and Exchange Commission filing.
For hospital customers, the purchase by deep-pocketed investors may help allay concerns about COHR's longevity.
Citing the open tender offer, Three Cities declined to comment on its bid or plans for COHR once the new owners have formally taken control. Three Cities is known as a patient investor more interested in crafting business turnarounds than in quickly carving up acquisitions for resale.
According to MODERN HEALTHCARE 's 20th annual contract management survey (Aug. 31, 1998, p. 43), COHR had 466 healthcare clients for its service outsourcing business in 1997, a 14% increase over 1996. In group purchasing, COHR's Purchase Connection subsidiary reported $700 million in buying volume in 1997, a 32% increase over 1996, according to MODERN HEALTHCARE 's 10th annual group purchasing survey (Sept. 21, 1998, p. 60).
COHR's biggest outsourced equipment service account is the University of Maryland Health System, which signed a letter of intent in September 1998 to renew its contract with COHR through June 30, 2001. An official could not be reached for comment about the buyout.
Raymond List, COHR's president and chief executive officer, said the new owners will lift "a cloud of uncertainty" hanging over the company. Three Cities, he said, is committed to building the business and will keep management.
Exiting the public stock market would mark a humiliating turnabout for COHR. Founded in 1976 as a subsidiary of what is now the Healthcare Association of Southern California, the outsourcing company was taken public with great fanfare in February 1996 at
$9 per share.
After a secondary offering at $20 per share eight months later, COHR's stock moved as high as $30.50, eventually beginning a long slide. COHR's per-share price stood at $3.09 on Dec. 23, the day COHR's board approved Three Cities' buyout.
Recently, the company has posted heavy losses. For the second quarter ended Sept. 30, 1998, it reported a loss of $5 million on revenues of $24.8 million, vs. a loss of $399,000 on revenues of $26 million in the year-ago period.