Lifetime Rejects Abbey Group’s Offer of Merger : Health care: Costa Mesa firm is confused by Boston company’s firmly negative response to the $220-million deal.

COSTA MESA —  A Massachusetts nursing-services company said Tuesday that it has rejected a takeover offer by Abbey Healthcare Group Inc. because the price is too low.

Abbey, one of Orange County’s largest providers of nursing and intravenous therapy services, revealed its proposal on Monday. Shareholders of Lifetime Corp., based in Boston, would receive as much as $220 million, or $23.50 a share, in cash and Abbey common stock. The merger would create the nation’s largest home health-care agency, with annual revenue of more than $1 billion.

But in a tersely written statement, Lifetime said that “its stockholders would not be served by any further discussions or consideration.” The company, reached Tuesday afternoon, would not comment further except to say that it considers the matter closed.

“Our response is absolutely clear on the negative,” said Lifetime spokeswoman Debra M. Goldberg. “We are absolutely disinterested.”

Officials at Abbey’s Costa Mesa headquarters said that they were disappointed and confused by the answer because their proposal was not made out of the blue. In fact, said Michael C. Miller, chief operating officer, Abbey has been negotiating for eight months to work out either a merger or a joint venture with Lifetime. The latest meeting was Sunday.

“This leaves the ball in their court,” Miller said. “The senior management has found their way to deny the offer without asking their own shareholders. They have abdicated their responsibility to their shareholders.”

Abbey does not appear to be giving up. Though Miller would not say what, if anything, the company will do to pursue a merger agreement, he said that “at this point we are keeping all the options open.”

The company also would not say specifically how it would finance such an acquisition but noted that it is essentially debt-free and has lined up “adequate backing to complete the transaction.”

A consolidation of the two companies would create a home health-care agency with 560 branches in 47 states. The largest such company now is Caremark Inc., a subsidiary of Baxter International in Deerfield, Ill. It has annual revenue of about $900 million.

Lifetime, with annual revenue of $885 million and 400 offices in 41 states, is more than twice as large as its suitor. Abbey had 1992 revenue of $248.7 million with 160 offices in 37 states. But Abbey boasts a stronger performance, with 1992 profit of $10.4 million, compared to Lifetime’s $5.2 million.

Peter Sidoti, an analyst with the brokerage NatWest Securities Corp. in New York, told Dow Jones News Service on Tuesday that Lifetime’s relatively poor earnings should give shareholders cause to think about the merger. The offer, he said, “made a lot of sense.”

Sidoti apparently is not the only one bullish on the idea. Investors on Tuesday seemed to bank on an eventual merger, buying Lifetime shares at more than four times the average daily volume. Lifetime’s stock closed at $21.875 a share, up $4, in trading on the New York Stock Exchange. Abbey, traded on the NASDAQ market, closed at $18.25 a share, up 25 cents.

Miller said that a merger would be timely because of the Clinton Administration’s harsh scrutiny of health-care costs. Companies such as Abbey and Lifetime make up one of the fastest-growing segments of health care, he said, because they save money by providing nurses and services in the home, rather than at a hospital.

Miller said that a general consolidation in the industry is likely. “Our view is that massive change is moving so rapidly,” Miller said. “We are not going to be left sitting at the gate.”

If the Lifetime deal falls through, Miller said, Abbey will pursue other opportunities. “While Lifetime is the biggest (target) and will accelerate our strategy, they are not the only national or regional nursing company in the U.S.,” Miller said. “This is not a one-strategy approach. We do have alternatives.”