FHP International's board of directors has approved a "Dutch auction" tender offer to repurchase 2.5 million of the company's 12.5 million shares of common stock outstanding at a price of $5.75 to $6.75 per share.
Under the offer, expected to be extended Wednesday, FHP shareholders may tender their shares to the company at any price from $5.75 to $6.75. The company then selects a single purchase price within that range sufficient to purchase the designated number of shares.
FHP, a Fountain Valley-based health maintenance organization, joins about 20 other Orange County companies buying back their own stock at discount prices following the stock market crash last month. A company spokesman said it was felt that the Dutch auction offer would be more equitable for investers than an offer at a price predetermined by the company.
Chairman Robert Gumbiner and other founding stockholders, directors and executive officers of FHP are expected to tender up to a total of 1.45 million shares at the minimum price of $5.75 per share, to reduce personal indebtedness, for diversification and liquidity, and for other reasons, the company said. Gumbiner owns about 4.6 million shares and would tender up to 1 million of those. Should all his tendered shares be purchased, Gumbiner would still hold 35.3% of shares outstanding.
FHP's stock closed Tuesday at $6, up 25 cents from Monday's closing.
The tender offer, proration period and withdrawal rights are expected to expire Dec. 23.