COSTA MESA — Abbey Healthcare Group Inc. may find itself standing in a line of suitors if it wants to buy East Coast competitor Lifetime Corp.
In a move that may thwart Abbey's purchase plans, Lifetime Chairman Anthony Reeves said Tuesday that his company will consider bids from other companies that might want to buy Lifetime--if they can beat Abbey's offer of $27.50 a share.
The decision came after Lifetime's six-member board of directors met Monday night for five hours in New York.
"I think the board feels strongly that under these circumstances we have a fiduciary responsibility to explore every avenue," Reeves said. He noted that no company has taken him up on the offer but added, "Remember, this (Abbey bid) was an unsolicited offer."
The announcement marked a turnaround for Lifetime, which had said that it wanted to remain independent and would fend off any takeover attempt.
Abbey, which provides nursing, respiratory and intravenous services to patients in the home, announced on March 23 that it wants to buy Lifetime as part of its effort to build the nation's largest home health care concern. Abbey's chief executive, Timothy Aitken, said such a company, generating more than $1 billion in annual sales and operating out of 560 offices nationwide, would benefit from any health care reforms that are eventually worked out by the Clinton Administration.
The proposal has been a boon for Lifetime's stock. Trading as low as $16.75 last month, it has climbed steadily on the New York Stock Exchange. It closed Tuesday at $25.25 a share, up $1.75.
Abbey's stock, traded on the NASDAQ market, closed at $17.75 a share, up 25 cents.
Forging a single company out of Abbey and Lifetime, Aitken said, would create a diverse organization offering respiratory, infusion, sleep disorder and rehabilitative therapy as well as supplying home medical equipment.
"We believe the synergies are self-evident," Aitken said.
Industries such as home health care, which saves customers money by offering home nursing services, would seem to be obvious beneficiaries of nationwide reform.
But at least one analyst said that, given the uncertainties of just what that reform might entail, now may not be the best time to create huge conglomerates.
"If it was me, I wouldn't do it," said Tom Schereur, a health care analyst with the brokerage Kidder, Peabody & Co. in New York. Aitken, he said, is "definitely taking a risk."
Nevertheless, Schereur said, if anybody can pull it off, Aitken would be the one. Known as a shrewd, no-nonsense businessman who rescued Abbey from a financial slump last year, Aitken has set his sights on Lifetime, which has not been performing up to analysts' expectations lately.
"You have to believe he can do it," Schereur said. "He is a turn-around artist."
Of all companies in the home health care field, Schereur said, Abbey, based in Costa Mesa, is best positioned to take on the debt required to purchase Lifetime. It has little debt now and in October raised about $86 million from the sale of bonds that holders may later convert into stock.
No other companies in the field, including Illinois-based Caremark Inc.--the nation's largest home health care concern--would likely be able to afford Lifetime, Schereur said.
Lifetime, based in Boston, said its board still considers Abbey's offer of $261 million inadequate, even though it is $41 million higher than its first offer in late March. It also said it will not entertain any proposal that does not include specifics about financing and other terms.
Abbey has not said who would finance the purchase. Rumors have surfaced about County NatWest Ventures Ltd., Citibank and Banque Paribas in France as possible lenders. Banque Paribas is familiar with the California market: It recently underwrote a deal in which Abbey's local competitor, Homedco Inc. in Fountain Valley, paid $72 million to acquire a Georgia company.
Lifetime also said it is considering alternatives to "maximize the value to shareholders."
Reeves would not specify if such alternatives might include spinning off the company's Office Angels, a secretarial temporary placement agency in London that has been losing money. In a recent Securities and Exchange Commission filing, the company said it has developed plans to divest itself of Office Angels.
Reeves said Tuesday that he would be willing to consider an offer by any company that wants to get into the home health care field. He did not specify what company might be interested or say if Lifetime officials have held informal talks with anyone.
That strategy, Kidder Peabody's Schereur said, suggests that Lifetime is so unhappy with Abbey's aggressive style that it is willing to thwart the proposal even if it must sell out to somebody else.
"I was surprised they came out today and put themselves on the block," Schereur said.
On the other hand, he said, Lifetime executives may have been convinced that they might benefit from examining their choices.
"My guess is that the board said, 'Let's shop it around and see what we can get for it,' " Schereur said. "They are seeing dollar signs light up in their eyes."
Schereur also thinks, though, that the Lifetime strategy could backfire. "If they put themselves on the block and no one else wants the company, it would play into Aitken's hands in a big way."