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Tampa company attracts suitors

Published Oct. 8, 2005

Shares of Pharmacy Management Services Inc., a provider of cost-control services for the workers' compensation market, soared Friday after the company said it is considering possible acquisition offers.

The Tampa-based company, which had revenues of $113.1-million last year, said it has retained Smith Barney Inc. as its financial adviser and has held preliminary talks with interested parties.

"There is no assurance that these developments will lead to an acquisition of the company," said Cecil Harrell, chairman and chief executive of the company that employs more than 650 people in Tampa.

The company's shares rose $2.50 to $16 Friday, closing at a 3{-year high in heavy trading.

The company is worth about $15.50 to $18 a share, or up to $157-million, estimated Charles Butler, a securities analyst with Raymond James & Associates.

"The board is likely to consider seriously any offer in the upper end of that range," Butler said. "The offer would also have to preserve the structure of the business and take into account the employees' interest."

Butler said he expected bids to come from health insurers or health maintenance organizations that might benefit from a move into workers' compensation services. Bids also could emerge from competitors such as Downers Grove, Ill.-based HealthCare Compare Corp., or CorVel Corp. Both specialize in reducing companies' workers' compensation costs. Analysts say those two companies could be either suitors or future takeover targets.

"An HMO that acquired the company could offer a corporation like General Motors one-stop shopping in health services," Butler said. "A competitor could expand its distribution network and gain economies of scale."

According to the U.S. Department of Labor, the rise in health care costs has been slowing since 1990, growing 5.4 percent last year. But analysts estimate workers' compensation costs are growing between 8 percent and 15 percent a year.

Only 3-million of the company's 8.7-million shares are publicly traded, Butler said. The rest are owned by corporate insiders. Harrell, 59, who founded the company in 1972, owns 3.8-million shares, the analyst said.