Independent service firm COHR makes move toward going private through Three Cities deal

Investment advisor firm makes acquisition bid

Independent service organization COHR has had more than its share of bad news recently. Over the past year, the company has experienced allegations of accounting irregularities, a critical profile in financial newsmagazine Barron's, the departure of several key executives, and an aborted divestiture attempt.

It's no surprise, then, that COHR executives might be interested in edging out of the limelight. They made a move toward that end last month when they agreed to let COHR be acquired by an investment firm that could take the company private.

On Dec. 24, COHR entered into a definitive merger agreement with Three Cities Research of New York City, in which TCR purchased a 48% interest in COHR from two institutional investors, Franklin Research of San Mateo, CA, and Strong Capital Management of Milwaukee, at a price of $5.13 per share. Ten days later, TCR made a tender offer for remaining COHR stock at the price of $5.38 per share.

If TCR's bid proves successful, COHR will once again become a private firm, which could bring respite to a company that has had to conduct its business very much in the public eye. As a private company, COHR will not be required to file public financial records or pay the costs associated with them. What's more, the TCR deal not only gives COHR freedom from the demands of public business, it also supports the company's commitment to rebuild, according to Raymond List, president and CEO.

"Three Cities approached us and did a lot of due diligence about COHR's businesses," List said. "We have three very good businesses-MasterPlan, Purchase Connection, and Pacific Health. (Three Cities) is a financially strong investor that believes in the businesses we're in and wants to grow them aggressively like we do."

TCR's offer also contains motivation for COHR to settle its outstanding shareholder lawsuit, a consolidation of five suits that were filed in spring of last year after revelations of accounting irregularities. If COHR can settle the suit within certain time parameters, the sale price of each share in TCR's tender offer could increase by $1, bringing the price up to $6.38 per share, the company said.

COHR's operations should not change as a result of the transaction, nor will its position as the largest independent ISO on the market be affected, according to List. In September, GE Medical Systems of Milwaukee purchased one of the last major competitors in the ISO landscape, Serviscope of Wallingford, CT (SCAN 12/16/98). COHR believes that its competitive edge can only be sharpened through its agreement with TCR.

"We believe that COHR's market position as an independent-on the MasterPlan side, which is now dominated by OEMs-gives us tremendous opportunity," List said.