PhyCor, MedPartners Call Off Merger Because of Different Corporate Cultures
PhyCor Inc. and MedPartners Inc. called off their proposed $6.25 billion merger, blaming "significant operational and strategic differences." At the same time, MedPartners said it expects to take two large charges in the fourth quarter and possibly to report a quarterly loss from continuing operations.</br></br>From the beginning, the planned combination of the two large physician management companies -- which stunned Wall Street when it was announced last October -- was greeted with skepticism by the Street. Almost immediately, the stock prices of both companies began to falter as analysts suggested that uniting the disparate cultures would be difficult. Yesterday, PhyCor, Nashville, Tenn., rose 12.5 cents to $26.50 in Nasdaq Stock Market trading. MedPartners, Birmingham, Ala., fell 76.5625 cents to $18.1719 in composite Big Board trading. The merger plans were called off after the market closed.</br></br>The merged company, which would have brought together the nation's two largest physician-management companies, would have had affiliations with about 35,000 doctors, or 5% of the country's physicians, and would have generated annual revenue of about $8 billion. Last fall, the companies heralded the deal as a way to put doctors on a level playing field with hospitals and health-maintenance organizations. Cost savings from economies of scale were also expected.</br></br>Nevertheless, the differences proved insurmountable. "Each company takes a much different approach to business in a number of key areas, including information systems, development, and operations," Joseph C. Hutts, PhyCor's chairman, president and chief executive officer, said in a statement. In an interview, Mr. Hutts said the deal unraveled over about a week's time. He declined to specify the differences that led to the dissolution. He said the two companies agreed not to elaborate beyond the prepared statement.</br></br>"The differences were quite significant," Larry House, MedPartners chairman and CEO, said in an interview. He also declined to elaborate, saying only that the clashes involved the business operations and the corporate cultures.