Comprehensive Care Corp. of Irvine, the nation's largest provider of hospital-based drug and alcohol treatment services through its Care Unit subsidiary, said Wednesday that it will be acquired for about $130 million.
The financially struggling firm is being acquired by First Hospital Corp. of Norfolk, Va., a smaller hospital company that plans to move Comp Care's 200-employee headquarters from Orange County to Norfolk.
The combination, subject to approval of shareholders and regulators, would make privately held First Hospital the majority owner in a new public company to be called FHC Comp Care.
Comp Care operates its CareUnit alcohol and drug dependency programs under contract at 170 hospitals across the country. The firm also owns 23 hospitals in 10 states, including three Orange County facilities in Brea, Orange and Costa Mesa. The firm reported revenue of $211.2 million last year.
Founded six years ago, First Hospital is less than half the size of Comp Care based on revenue. The firm reported revenue of $86.1 million and net income of $7 million for the fiscal year ended June 30, 1988.
Analysts said major changes have long been needed for Comp Care, which has suffered financially as shorter patient stays and increased competition have cut into business. The firm's earnings fell to $9 million for the fiscal year ended May 31, 1988, from $17.2 million in 1985 .
Debt Sharply Higher
The company's debt has increased dramatically in recent years, reflecting an aggressive expansion program involving construction of 14 hospitals from 1982 through 1987. Cash reserves have declined, in part because Comp Care spent $60 million to buy back 5 million shares of its stock, which has lost more than half its value in the past four years.
First Hospital Vice President Robert Viso said his firm has no plans to close any of Comp Care's hospitals. Chairman B. Lee Karns said he expects key Comp Care employees to join the new firm, although they have not been promised jobs in the new company.
Although First Hospital is smaller than Comp Care, it clearly will dominate the combined operation. The new company's seven-member board of directors will include five members designated by First Hospital and two from Comprehensive Care, one of whom will be Karns. First Hospital Chairman Ronald I. Dozoretz will be chairman of the new company. Karns said he will not become an officer in the new operation.
The merger calls for First Hospital, which is owned primarily by Dozoretz, to receive a 63% stake in the new company, with Comp Care shareholders getting the rest.
Comp Care shareholders will receive $5 in cash and a bond valued at $2.50 for each share of stock they own. Comp Care stock closed Wednesday at $10.75 per share, down 37.5 cents for the day on the New York Stock Exchange.