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Big Shareholder Gets Seat on Apria's Board

Investment: With threat of a proxy fight, the health care group responds to criticism.


COSTA MESA — Under pressure from major investors to sell, Apria Healthcare Group Inc. put a member of its biggest institutional shareholder on its board of directors Wednesday.

Ralph Whitworth, a principal of Relational Investors LLC, joined the recently expanded nine-member board just as the managed health care company is wrapping up a six-month look at its financial alternatives.

Earlier this month, Apria announced a major reorganization, including new top managers. But Relational Investors, which owns 9.9% of Apria, joined a chorus of Wall Street analysts and other investors in saying the steps didn't go far enough.

The shareholder threatened to start a proxy fight if the company didn't give it two board seats.

Whitworth, who also is a partner in Batchelder & Partners Inc., a financial advisory and investment banking firm in La Jolla, started work on Apria's board immediately, the company said.

Apria spokeswoman Sheree L. Aronson said the company was pleased to bring Whitworth on the board--which had been an eight-member body that often split in the past. She also said Apria continues to consider seriously the viewpoints of its shareholders.

The management changes appeared to lessen the likelihood that Apria would agree to be acquired by another company, and that has upset some shareholders.

Money manager Third Point Management Co. in New York, for instance, sent a letter to Apria earlier this week calling on directors to sell the company.

"We, along with other shareholders, will hold this board accountable if opportunities for a transaction are wasted," Third Point manager Daniel S. Loeb wrote in a letter to Apria's new chairman, George L. Argyros.

Third Point, which manages more than $100 million for U.S. and offshore institutional investors, owns about 0.5% of Apria's shares.

Last week, Franklin Mutual Advisors Inc., the mutual fund run by often-vocal Michael Price, called on Apria to agree to one of the proposals under consideration. The mutual fund holds an 8.6% stake in Apria.

Apria hired New York investment banker Goldman Sachs & Co. last summer to find ways to help the company find more money, even if it meant finding a buyer. About 40 parties expressed an interest, the company said then.

A recent potential buyer, Transworld HealthCare Inc., revised an offer it made in December to acquire Apria for $1.45 billion cash, stock and assumed debt, or $16 a share. Apria directors rejected the deal. Goldman Sachs is reviewing the new proposal for $18 a share, including $13 per share in cash.

Another bidder, Coram Healthcare Corp., may still be interested even though Apria rejected its December bid of more than $16 in cash and stock, Coram Chief Executive Don Amaral said in a January issue of industry newsletter Home Health Line.

Apria hasn't been able to reap the benefits from the merger that created it in 1995. It has been beset by computer breakdowns in its collections systems, unprofitable business ventures and rapid changes in the industry. Besides cutting some staff and costs, it has fixed its computer system temporarily.

Apria's stock gained 50 cents a share Wednesday to close at $12.44 on the New York Stock Exchange.

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