LAKE FOREST, Calif.--Apria Healthcare Group, one of the nation's largest HME providers, said Thursday it would be acquired by an affiliate of private equity company The Blackstone Group in a merger transaction valued at $1.6 billion.
For each share of common stock they hold, Apria shareholders will receive $21 in cash, a premium of 33 percent over the $15.89 share price on Wednesday and 29 percent over the stock's average closing price for the previous 30 trading days.
The transaction will be financed through a combination of equity contributed by Blackstone and debt financing from affiliates of Bank of America, Wachovia and Barclays Capital. The deal is expected to close in the second half of 2008, although under its terms, Apria can look for better offers until July 24. If Apria's board accepts a superior proposal, the company would be obligated to pay a break-up fee.
In conjunction, Apria opened a $280 million line of credit with affiliates of Bank of America, Wachovia and Barclays Capital. Proceeds will be used to fund potential repurchases of Apria's senior notes and to pay related tax liabilities.
When the deal is completed, Apria--which operates approximately 550 respiratory and infusion therapy locations in all 50 states--will become a private company wholly owned by Blackstone and its affiliates. Apria's corporate headquarters will remain in Lake Forest, Calif.; its infusion division headquarters will remain in Denver.
On news of the announcement, Apria's shares jumped to $20.06 in Thursday afternoon trading on the New York Stock Exchange.
Commenting on the deal, business analysts noted the company's long-battered stock and pressure from shareholders concerned about continuing lower Medicare reimbursements, particularly in light of the current Washington back-and-forth on oxygen cuts and competitive bidding.
Marking a strategic move away from reliance on Medicare and Medicaid, Apria acquired Coram, a national home infusion and specialty pharmaceutical services provider, for $350 million in a cash deal that closed in December. (See HomeCare Monday, Oct. 22, 2007.)
This is not the first time Apria has looked at a sale. In June of 2005, the company retained investment banking firm Morgan Stanley to consider potential offers. Later that year, however, Apria's board announced that none of the proposals it received represented its “value and prospects for future appreciation” and took the giant provider off the block.
In a statement issued Thursday, Apria CEO Lawrence M. Higby said the Blackstone deal was in the best interest of shareholders.
"We are excited about teaming up with Blackstone to continue pursuing our goals of growth while continually improving operating efficiencies and enhancing our service for all of the patients and customers we serve,” Higby said. “We are delighted that a company with the resources and reputation of Blackstone recognizes the value inherent in the service-first approach that our associates across the country deliver every day.”
Apria's board of directors has approved the agreement with Blackstone and will recommend its adoption to shareholders. The company will solicit shareholder approval at a special meeting that could be held as early as September.
Apria and its operating divisions serve over two million patients. In addition to those covered by government insurers, Apria has over 2,000 preferred provider contracts with managed care organizations nationwide.
Speculating on a similar buyout of Apria rival Lincare, Wall Street analysts said it is unlikely. Following news of the Apria deal, on Thursday, Lincare's shares rose to $28.69 on the Nasdaq but had settled to $27.21 by Friday's market close. Headquartered in Clearwater, Fla., Lincare serves 700,000 customers in 47 states with more than 1,020 branches.