Inside Wall Street
LOVE TRIANGLE AT ABBEY
There's nothing like takeover talk to stir things up. And that's what's going on in the home health-care business. The latest buzz is that Abbey Healthcare Group (ABBY)--whose chairman and CEO, Tim Aitken, is a former investment banker in London and New York--is on the block.
"If there's anything to indicate that Abbey is headed toward a deal, it is Aitken's background," says one San Francisco investment manager. "He just wanted Abbey to get back on its feet and get robustly going. And now that that's practically done, he wants to sell off the company," says this pro.
He may be right on the money. A source close to Aitken says Abbey may turn out to be more attractive than some suitors believe. The provider of home medical equipment and respiratory and infusion therapy is said to be considering an offer by a large British pharmaceutical company to buy a 15% to 20% stake. "This foreign drugmaker wants a foot in the door of the fast-growing U.S. home health-care business," says the money manager.
Such a linkage will certainly enhance the value of Abbey, currently trading at 29 a share, to prospective suitors. A source close to Abbey officials says "Abbey is in a kind of a triangle situation right now." It has two avid suitors: Coram Healthcare, which is believed to have talked to Abbey regarding a possible bid for the company, and Homedco Group, a major provider of home health-care services. Coram Chairman and CEO Jim Sweeney says it is his policy not to comment on Coram's acquisition plans. Homedco didn't return calls.
Homedco's focus is on respiratory treatment while Coram is big in infusion therapy. With estimated 1995 revenues of about $500 million, Abbey is a key medical-care provider for outpatients. It derives 42% of its revenues from respiratory therapy and 35% from home-infusion (intravenous medicine) and nursing services.
Analyst Ann Logue at Volpe Welty. says Abbey's national reach gives it strength in negotiating contracts with managed-care organizations. The company's contracts have ballooned from 40 in 1992 to 1,400 today nationwide.
Logue figures that, based on earnings prospects alone, Abbey is worth 35 a share. But in a buyout, it could be worth more, she believes.
The price may be in the 45 to 50 range, says one pro, who bases his figures on projected 1995 and 1996 earnings. He says Abbey will likely exceed analysts' 1994 and 1995 earnings estimates. Aitken says he is "pro-shareholder by nature" and would consider any offers. When asked about allowing a British drugmaker to buy a stake, Aitken declined comment. But when questioned on whether Abbey will be sold, he would only say: "At the right price, I would hit the bid."BY GENE G. MARCIAL