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 AVON, Conn., Sept. 23 /PRNewswire/ -- Value Health, Inc. (NYSE: VH) and Preferred Health Care Ltd. (NASDAQ: PHCC) today announced that they have signed a definitive agreement whereby Value Health will acquire Preferred in a merger valued at approximately $425 million. Completion of the transaction, which has been approved by both Boards of Directors, is subject to receipt of regulatory approvals and approval by the stockholders of both companies. It is anticipated the acquisition will be completed around year-end 1993.
 The behavioral mental health divisions of the two companies will be merged, thereby creating the nation's largest provider of managed mental health, substance abuse and employee assistance services covering more than 12 million people with estimated 1993 revenues of $165 million.
 Terms of the agreement call for each share of Preferred's stock to be exchanged for 0.88 shares of Value Health's stock. Based on closing stock prices on Sept. 22, the transaction would provide shareholders of Preferred with an indicated value of $31.46 per share of Preferred Health Care stock in a transaction totaling approximately $425 million. Actual transaction values will depend on Value Health's closing stock price on the day the transaction is completed. Value Health has also received an option to purchase, under certain conditions, up to 19.9 percent interest in Preferred prior to the closing of the transaction. The transaction will be tax-free and will be accounted for as a pooling of interests.
 American PsychManagement, Value Health's behavioral health subsidiary, and Preferred are both leading providers of programs that manage the cost and quality of mental health and substance abuse benefits for major employers, HMOs and insurance companies. In addition, Preferred offers managed care services in the workers' compensation market as a result of certain acquisitions concluded in 1992.
 Robert E. Patricelli, chairman and CEO of Value Health, said, "We are excited by the opportunity of combining the best of both companies' organizations, provider networks and systems to create the premier managed mental health company. Preferred's customer list give us new opportunities to cross-sell our other managed care products, and we welcome an opportunity to enter the rapidly growing workers' compensation cost management field. The transaction is expected to be accretive to earnings in 1994 once the organizations are integrated," he added.
 David J. McDonnell, D.S.W., chairman and CEO of Preferred, said that "We welcome the opportunity to be part of a larger, very successful multi-product company which is well positioned for health care reform. The resulting values to our shareholders and the career opportunities for our management and staff are outstanding," he said. McDonnell noted that "our newly combined company will provide services to 50 of the nation's largest 250 companies and more than 32 million people." McDonnell will be joining the Board of Directors of Value Health upon completion of the transaction.
 Value Health, Inc. is a leading provider of specialty managed care benefit programs and health care information services. These programs are designed to enhance quality and control costs in selected health care sectors which are of concern due to their size, rapid cost escalation and potential for overutilization. These areas include prescription drugs, mental health and substance abuse, and foot care. Value Health's health care information services are based upon use of clinical and data analysis to guide health care decision making. These products include clinically based precertification and claims review, provider profiling, claims cost analysis, evaluation and management of health benefit providers, and health policy and management consulting.
 Preferred Health Care Ltd. is a leading provider of programs that manage the delivery of mental health and substance abuse care. Preferred's principal product is its PsychCare program, a comprehensive managed mental health system that integrates patient evaluation, referral to the Company's preferred provider networks and concurrent utilization review. The Company also offers an optional employee assistance program in conjunction with this product, as well as claims payment services. The Company provides a fully integrated workers' compensation managed care administrative service that is designed to reduce costs and improve the quality and result of care provided to injured workers.
 -0- 9/23/93
 /CONTACT: Judy Hyfield-Starr of Value Health, 203-678-3472; or John Addeo of Preferred Health Care, 203-761-7016/

CO: Value Health, Inc.; Preferred Health Care Ltd. ST: Connecticut IN: HEA SU: TNM

CM-DJ -- NE004 -- 5078 09/23/93 09:35 EDT
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Publication:PR Newswire
Date:Sep 23, 1993

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