Apria Explores Possible Sale

Lake Forest, Calif.

The nation’s largest home medical equipment provider has confirmed it’s on the block.

Apria Healthcare officials said last month the $1.45-billion provider has retained investment banking firm Morgan Stanley to consider potential offers. Insiders have speculated those offers could be as high as $2.5 billion, according to the New York Post.

Apria CFO Amin Khalifa said the move could draw interest from private investment firms as well as other types of “publicly held companies that would find our business a good complement to theirs.” He added that “Morgan Stanley is soliciting bids so we don’t leave any stone unturned.”

“The company is in a strong financial condition, has an excellent management team and considers its prospects to be very good,” Apria Chairman David Goldsmith said. “Accordingly, no decision has been made to proceed with a sale, and the board of directors may conclude that shareholder interests are best served by remaining an independent, publicly owned company.”

Nevertheless, Khalifa said that Apria would be able to implement planned changes more quickly as a private company. “We have systems that could still be improved upon,” he said, noting that the provider is bringing on a new chief information officer to upgrade its business processes.

“We’re seeking to more rapidly process an order and the collection of that [order],” he said, pointing out that the upgrade will be implemented regardless of what happens.

Apria, which provides respiratory therapy, home IV and HME through 475 branches in 50 states, is also exploring other cost-control and productivity initiatives. The firm recently brought in UPS’ consulting arm to streamline its routing and delivery operations.

According to Arthur Henderson, a research analyst who follows Apria for Jefferies & Co., New York, the company “has long been undervalued” mainly due to its large managed care business, which he said generally produces smaller margins than business from Medicare. He said the time might be ripe “for a financial buyer to straighten operations and then bring it back public when the business can be appropriately valued.”