LAKE FOREST, Calif.--The nation's largest home medical equipment provider has confirmed it's on the block.

Last week Apria Healthcare officials said the $1.45-billion provider has retained investment banking firm Morgan Stanley to consider potential offers. According to the New York Post, insiders have speculated those offers could be as high as $2.5 billion.

Apria CFO Amin Khalifa said the move could draw interest from private investment firms as well as other types of "publicly held companies that would find our business a good complement to theirs." He added that "Morgan Stanley is soliciting bids so we don't leave any stone unturned."

Company shares jumped by more than 16 percent Tuesday after the Post published an article about the possible sale. Soon after, Apria released a statement confirming the news.

"The company is in a strong financial condition, has an excellent management team and considers its prospects to be very good," Apria Chairman David Goldsmith said. "Accordingly, no decision has been made to proceed with a sale, and the board of directors may conclude that shareholder interests are best served by remaining an independent, publicly owned company."

Nevertheless, Khalifa said that Apria would be able to implement planned changes more quickly as a private company. "We have systems that could still be improved upon," he said, noting that the provider is bringing on a new chief information officer to upgrade its business processes (see HomeCare Monday, May 16).

"We're seeking to more rapidly process an order and the collection of that [order]," he said, pointing out that the upgrade will be implemented regardless of what happens. But, he continued, "It's always a little more complicated when you're doing [the upgrade] and still trying to hit every penny with every quarter's earnings. You can do it a little faster as a private firm."

Apria, which provides respiratory therapy, home IV and HME through 475 branches in 50 states, is also exploring other cost-control and productivity initiatives. The firm recently brought in UPS' consulting arm to streamline its routing and delivery operations, and "we've reduced the number of routes within the last six months," Khalifa said. "Our drivers spend less time driving and more time servicing customers. Delivery windows are tighter all the time."

While the company said Medicare reimbursement cuts and a decision not to renew its Gentiva CareCentrix contract last year had affected earnings, officials were generally optimistic after the first quarter, estimating revenue growth for 2005 in the 5 percent to 6 percent range.

According to Arthur Henderson, a research analyst who follows Apria for Jefferies & Co., New York, the company "has long been undervalued" mainly due to its large managed care business, which he said generally produces smaller margins than business from Medicare. He said the time might be ripe "for a financial buyer to straighten operations and then bring it back public when the business can be appropriately valued."