Apria sticks out a 'for sale' sign

Sunday, June 12, 2005

COSTA MESA, Calif. -- Apria confirmed last week that several private equity groups have approached the company and inquired about buying it. The national has hired Morgan Stanley to contact the interested parties.

In confirming the rumors, Apria CEO Amin Khalifa also told HME News that, whether or not it sells, Apria plans to become more efficient -- and profitable -- by investing in technology that improves its order-intake and claims-collections processes.

Industry analysts believe that by improving its operational efficiencies, Apria could increase its profit margin and bring it more in line with its biggest competitor, Lincare. However, pulling off such a makeover as a publicly traded company poses problems. Specifically, Wall Street generally hammers the stock of any company that doesn't live up to growth expectations -- even if short-term pain is intended to produce long term gains.

"If we go private and we have to invest a couple of million dollars in one quarter and it costs us a couple of pennies in earnings, it is a little easier getting that done as a private company," Khalifa said. "We could probably go a little faster, but either way we are getting this done."

The project, he added, will take two to three years.

"There is a logic to this company potentially being taken private," said Bill Bonello, an analyst with Wachovia Securities. "If you are a private buyer it appears that there ought to be an opportunity to streamline."

If a private company bought Apria, it would do so with intentions of going public or selling at a higher price after streamlining operations and boosting profits. Of course, if the company goes out for bid, a competitor could also buy the company, Khalifa said.

Some industry watchers speculated that Apria could sell for as high as $2.5 billion.

"If we go through this process, if the price isn't right, a deal won't be struck," Khalifa said.