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Apria Drops 17% After Prediction of Weak Quarter

Stocks: Analysts say the latest news probably would affect the firm's efforts to find a buyer.

September 18, 1997|From Times Wire Services

COSTA MESA — Apria Healthcare Group shares tumbled nearly 17% Wednesday, a day after the provider of home health care services predicted another weak quarter.

The stock dropped by $2.81 to $14 a share in heavy trading on the New York Stock Exchange. More than 2.6 million shares changed hands, nine times the average daily volume.

The stock fell 69 cents a share on Tuesday after the company said third-quarter earnings would fall below year-earlier levels because of its recent decision to eliminate non-core businesses and withdraw from underperforming managed care contracts.

The news came nearly two months after Apria said it had hired Goldman Sachs & Co. to explore alternatives.

Analysts said the latest developments were likely to affect the company's efforts to find a buyer.

Apria said Tuesday that its efforts to get out of unprofitable managed care contracts will reduce third-quarter earnings to 20 cents to 25 cents from 40 cents a year earlier. Analysts had estimated that the company would post earnings of 37 cents a share for the quarter.

Apria has reported several quarters of disappointing earnings, partly due to billing problems and the conversion of information systems. The company was created in 1995 by the merger of two Orange County competitors, Homedco Group Inc. and Abbey Healthcare Group Inc.

Analysts said the announcement was not expected to scare off potential buyers but probably would affect the price of any deal.

Analyst Peter Emch said he now expects the company to be sold for $12 to $14 per share, down from his previous target of $18 to $20. Based on its 51.4 million shares outstanding, a transaction at $12 to $14 per share would be worth between $615 million and $720 million.

"We believe that the prospect for shareholders to benefit from such a sale are poor, however, and therefore we are downgrading our investment rating on the shares to 'market perform' from 'buy,' " Emch wrote in a report.

On Wednesday, Smith Barney downgraded its rating on the stock to "neutral" from buy.

The company has declined to discuss details of talks with potential buyers, saying only that the process is moving forward.

However, analysts and traders who have spoken to the firm said they have been told that 30 prospective parties have signed confidentiality agreements and that the company hopes to reach a transaction in late October or early November.

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