Soros Examines Universal Health

Why is George Soros interested in Universal Health Services--an $800 million company that owns and operates acute-care and ambulatory-surgery facilities and psychiatric hospitals?

A group controlled by the legendary Soros has upped its stake in Universal Health from 5.6% to 6.5% and has informed management it intends to pursue ways to maximize shareholder value. The Soros group, says one money manager, expects to meet with Universal's top brass before long.

"That all spells `takeover' as far as I'm concerned," says this money pro. He speculates that either Humana, the giant health-care and hospital company, or Columbia/HCA Healthcare will propose a merger or an outright buyout to Universal. Both Humana and Columbia have grown through acquisitions. Columbia recently announced plans to merge with Medical Care America, an operator of outpatient surgery centers.

Mike Kicera, managing partner at MKR Capital Management in Rochester, N.Y., which focuses on takeover and special-situation stocks, says Universal is one of the most undervalued hospital companies around. Whereas its peers in the industry are selling at 23 to 26 times earnings, notes Kicera, Universal, trading on the Big Board at 25, sells at a p-e of 9. He thinks the stock is worth 42.

Investment adviser Charles LaLoggia is also convinced Universal is a takeover target. "Soros wants to ride the takeover wave that's starting to engulf the industry," says LaLoggia.

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