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Assisted living spinoff finds tepid market Integrated Living offering falls short; Senior housing


The initial public offering yesterday for Integrated Living Communities, the assisted living division being spun off by Integrated Health Services of Owings Mills, raised less than half of the amount anticipated when the parent company filed for the offering in June.

The company initially planned to offer 6.5 million shares at $15 to $18. It wound up selling 4.2 million shares at $8.

Marc B. Levin, executive vice president of Integrated Health, said the drop in price and number of shares was "a response to market conditions over the last few months for assisted living. The amount of shares and price that may have been of interest to Wall Street four months ago is not of interest now."

The difference is "not much of a problem" for Integrated Health, which has well over a billion dollars in annual revenue, said D. Scott Mackesy, an analyst with Dean Witter Reynolds in New York. Integrated Health will realize $11.2 million from the sale, compared with the $51.5 million to $61.7 million it would have raised based on June projections.

"The more important issue," Mackesy said, "is that Integrated Living Communities only got about $20 million. In order for them to grow, they need capital."

Integrated Living will realize $22.4 million from the sale. Had June targets been met, it would have gotten between $46.5 and $55.8 million.

"Of the last five or six initial public offerings in the assisted living industry, all have priced well below the filing range," Mackesy said. Integrated Living suffered from a market with "a little bit of saturation" in assisted living, and "the market didn't have confidence in the valuation ascribed to Integrated Living," he added.

Assisted living is housing targeted at senior citizens that provides services, such as meals and housekeeping, but less intensive care than would be available in a nursing home.

Integrated Living already operates 17 assisted living and senior housing facilities in six states. Its growth plan calls for it to develop or obtain management contracts for 60 to 75 facilities annually for the next three years.

Integrated Health also plans aggressive growth. After spinning off the assisted living division and selling its pharmacy operation, it has been seeking to build in markets where it is active a full range of "post-acute" services -- care for people getting out of the hospital, including sub-acute care facilities, rehabilitation services and home health. It has announced four small acquisitions recently.

Levin said the reduced capital from the assisted living spinoff VTC would not affect Integrated Health's strategy. He said the company expects to close this month on the purchase of First American Health Care of Brunswick, Ga., with $450 million in annual revenue, "one of the largest home health providers in the country." The First American deal, announced in February, has been held up by bankruptcy proceedings, he said.

The Integrated Living offering was underwritten by Alex. Brown & Sons, Smith Barney, and Donaldson, Lufkin & Jenrette. It closed at $8 a share, after trading at about $7.75 for much of the day. Volume was 2,152,000 shares, almost exactly half of the 4.2 million to be offered.

Integrated Health closed at $25.625 a share, up 37.5 cents.

Pub Date: 10/05/96

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