Movable medical equipment company Universal Hospital Services Inc. last week carried on business as usual, diligently reporting third quarter earnings, securing a $10 million credit facility expansion and closing on a previously announced acquisition. What would have marked a fulfilling corporate week for most firms, however, actually served to mask UHS’ continuing inability to transact the one financial dealing for which it and its majority shareholder keep pining: the successful pricing of an initial public offering.
As of press time last Thursday, the UHS offering was more than two weeks overdue, with market sources giving it virtually no chance of getting off the ground until sometime this week. The deal had originally been set to price on October 16, but was then delayed as its offering price range was decreased to $14 to $15 per share, down from $17 to $19 per share. Despite the markdown and three other successful health-care IPOs, money managers still don’t seem interested in buying.
“It’s not a bad company, and I might eventually invest if they stand the test of time on the [public] market,” said one investor. “But I don’t see myself buying into the IPO, especially not in the post-September 11 market.”
While the terrorist attacks have clearly softened investor interest across the board, UHS may have been particularly hard hit due to some unlucky logistical timing.
Just minutes before Flight #11 crashed into One World Trade, UHS launched the second leg of its IPO road show by meeting with investors from Morgan Stanley at the bank’s Midtown Manhattan office. Before UHS had been given a chance to complete its pitch, one of the Morgan Stanley bankers received the horrible news via cell phone and the meeting was abruptly discontinued.
Also effectively canceled was an afternoon appointment UHS had set up with CIBC Oppenheimer on the 31st floor of Two World Trade.
For their part, UHS CEO David Dovenberg and CFO John Gappa hopped in their limo and asked the driver to take them as far north as possible. After learning that the bridges in and out of Manhattan were closed, the driver invited the pair to his Spanish Harlem apartment, where they all stayed glued to the television.
When the bridges reopened later that day, the driver brought Dovenberg and Gappa to a Stamford, Conn.-based hotel, where they stayed for two days until borrowing a UHS delivery van for the 21-hour trek back to Bloomington, Minn.
“We tried to get a flight back, but it finally made sense just to drive it,” Gappa said.
Several weeks later, UHS and lead underwriter UBS Warburg had regrouped enough to restart the road show, but it seems that forward progress may have been irreversibly lost. Although the company has stubbornly refused to withdraw its offering, investors contacted for this story said the company may need to either once gain lower the price, or delay the deal until the IPO window opens even farther.
“They’ll probably know everything in the next few days,” said a source aware of the situation. “What is most interesting is that this company was already public once [prior to being recapitalized by private equity firm J.W. Childs Equity Partners in 1998], so they have more name recognition than some other health-care companies trying IPOs.”
J.W. Childs bought out UHS after the Federal Trade Commission blocked a higher bid by fellow medical equipment firm Mediq. The investment firm currently holds approximately 78% of UHS’ outstanding common stock.
According to its most recent filing, UHS is attempting to raise $72.5 million through the sale of 5 million shares of common stock. U.S. Bancorp Piper Jaffray and CIBC World Markets are co-managing the deal alongside UBS Warburg.
Dan Primack can be contacted at:Daniel.Primack@tfn.com