Magellan writes off losing venture

It will take charge of $42 million for 40% share in Charter

Health care

September 15, 1999|By M. William Salganik | M. William Salganik,SUN STAFF

Magellan Health Services Inc. said yesterday that it has completed a deal to disentangle itself from operating mental hospitals.

The deal, announced a month ago, ended Columbia-based Magellan's call center and franchise operations for Charter Behavioral Health Systems. Magellan reduced its stake in Charter from 50 percent to 10 percent.

Magellan will take a charge of $42 million to $48 million in the fourth quarter to write down Charter-related assets.

Magellan was losing about $6 million a year from Charter Behavioral franchise operations. Charter Behavioral runs 88 mental hospitals.

Crescent Operating Co., of Fort Worth, Texas, owns the balance of Charter Behavioral, and Texas financier Richard Rainwater, who runs Crescent, is a major stockholder in Magellan.

"We are pleased with the closure of this divestiture," Henry T. Harbin, Magellan's president and chief executive officer, said yesterday. "It completes a critical step in achieving our goal of becoming a pure specialty managed care organization."

A few years ago, Magellan's predecessor company in Atlanta was primarily in the business of operating mental hospitals.

In 1995, it bought a controlling interest in Columbia-based Green Spring Health Services, which acts as a sort of mental health HMO, receiving premium payments and contracting for therapy and hospitalization.

Magellan eventually sold the hospital buildings and half the operating company to Rainwater-affiliated companies, and used the cash to buy more mental health managed care companies.

It is now responsible for mental health care for 65 million Americans. It also has units managing specialty medical care and community-based mental health services.

Magellan stock closed yesterday at $7.9375 a share, down 12.5 cents. Crescent Operating fell 15.625 cents to $4.78125.

Pub Date: 9/15/99

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