Care Enterprises Reduces Public Offering by 30%

Citing declining stock market conditions and a feuding shareholder’s withdrawal from a joint stock sale, Care Enterprises in Laguna Hills trimmed its previously announced public offering by 30% and began selling 2.5 million shares of its Class A common stock Friday at $5.25 a share.

Care, the nation’s fourth largest nursing home operator, will apply the estimated $13-million net proceeds of the sale entirely to its huge $194-million long-term debt, according to Boyd W. Hendrickson, president and chief operating officer.

Most of the debt, which carries an average 14% interest cost, was incurred from 1983 to 1985, when the company swelled from 40 to 124 facilities in seven states.

While Care originally had planned to offer 3 million shares of the special Class A stock, the offer was trimmed, Hendrickson said, because “the market condition in general was not good for a public offering. The stock market fell 100 points in the last month.�

Additionally, about 500,000 shares were pulled off the market last week by founding shareholder Ted Nelson, who resigned as a Care Enterprises director May 5 in a dispute with his half-brothers and co-founders, Lee and Dee Bangerter.

Nelson, who also owns 22% of the company’s Class B stock, could not be reached for comment on why he withdrew his shares from the offering.

Each share of the Class A stock represents one-tenth of a vote, while Class B shares carry a full vote. Nearly 115,000 shares in the Class A offering were held by Ralph Hazelbaker and John Haemmerle, principals in the First Ohio Investment Group, which Care Enterprises bought in April, 1985.

The rest of the offering--just under 2.4 million shares--was newly authorized stock that raised the total number of Class A shares outstanding to more than 5.2 million.

Drexel Burnham Lambert Inc. and Dean Witter Reynolds Inc. are managing the offering.

The $5.25-a-share price was the lowest the Class A stock has sold for in the last year. The stock, which had been as high as $8.25 a share in the last year, closed at $5.50 Friday. The company’s Class B common stock closed at $6.13, down 12 1/2-cents from Thursday’s closing.

Nelson’s quarrel with the Bangerters centered on his opposition to the reincorporation of the company under a charter that he claimed effectively strips minority shareholders of control. The charter, approved last month, requires a 75% shareholder vote to oust a director. The Bangerters own 45% of the Class B stock and 37% of the Class A stock, making it impossible for a director to be removed without their approval.

Nelson and the Bangerters also own a majority stake in Winn Enterprises, a holding company for the Knudson Foods dairy company in Los Angeles, Mountain West Savings & Loan Assn. in Ogden, Utah, and numerous real estate holdings.