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American Health Plans Merger

Alliance: Ailing owner of high-tech diagnostic centers to join forces with Dallas-based company.

February 28, 1996|BARBARA MARSH | TIMES STAFF WRITER

NEWPORT BEACH — American Health Services Corp. and Dallas-based Maxum Health Corp., both loss-ridden owners of high-tech diagnostic centers, said Tuesday that they plan to merge.

Assuming that shareholders of both companies approve the deal, American Health and Maxum would form a new company, InSight Health Services Corp., with headquarters in Orange County.

The companies share troubled histories in the financially battered marketplace for magnetic resonance imaging, CAT scans and other high-tech diagnostic services. Cost-cutting pressures in health care prompted repeated losses in recent years, forcing the delisting of their publicly traded stocks, said E. Larry Atkins, American Health's chief executive.

They also have a major creditor in common. General Electric Co., which makes and finances sales of diagnostic equipment, is owed at least $60 million by the companies and is considered key to the deal.

Atkins said GE is expected to convert some of the debt into preferred stock in the new company, reducing interest costs and giving InSight a healthier balance sheet. GE could claim a 48% stake in the new company by converting the preferred stock into common. The new company would also apply to have its stock listed on Nasdaq.

The companies aim to cut costs by closing Maxum's Dallas headquarters and trimming about 20 jobs there. Atkins said that none of American Health's 40 corporate employees in Newport Beach will be laid off. Altogether, American Health employs 320 people across the country, and Maxum has about 360 workers, Atkins said.

Based on last year's financial results, the firms would have combined annual sales of $85 million.

American Health's top executives, Atkins and Chairman Frank Egger, would have the same titles in the new company, Atkins said. Glenn P. Cato, Maxum's chief executive, would become executive vice president and chief operating officer.

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