Apria May Drop Plans to Buy Vitas

Apria Healthcare Group Inc., reacting to its slumping stock price, said Wednesday that it wants to drop plans to buy Vitas Healthcare Corp. of Miami.

The Costa Mesa-based home health care giant would focus, instead, on boosting the revenue and profit in its basic business--a source of disappointment for analysts since the merger last year of two Orange County companies that formed Apria.

Wall Street also got cold feet over the company’s plans to buy the privately held Miami hospice operator, which had a loss of $2.8 million last year on sales of $231 million.

In the months after the company’s June 6 announcement of plans to buy Vitas, Apria’s stock tumbled 37% to $19.375 on the New York Stock Exchange. But the stock has recovered a bit, and closed Wednesday at $20.25, up 87.5 cents.

Apria’s agreement to acquire Vitas for $212 million in cash and stock contained a provision giving either company the option of calling off the deal if Apria’s stock is less than $22.125 the day before the transaction closes. The acquisition was expected to be completed sometime this month.

Apria had agreed to pay $70 million worth of stock as part of the deal, meaning it would have had to issue more shares because of the company’s declining stock price.

Apria said Wednesday it was discussing alternatives to a merger, including some other business relationship, but would not elaborate. Vitas wouldn’t comment.

Analysts have expressed concern over problems in Apria’s basic home health business, stemming at least in part from the rocky merger last year of Orange County-based rivals Homedco Group Inc. and Abbey Healthcare Group Inc.

Apria’s announcement in late September that earnings this year might run as much as 8% below analysts’ estimates proved an unpleasant surprise on Wall Street.

In addition, Thomas Snow, analyst with Buckingham Research, said Apria had hoped Vitas would make money next year, so it could cover the costs of borrowing cash required to complete the deal.

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Unhealthy Losses

Apria Healthcare Group’s stock has plummeted nearly 40% since the company in June announced its plan to acquire Vitas Healthcare Corp. Weekly closes since June 7 and latest:

Wednesday’s close: $20.75

Source: Bloomberg Business News