CompCare Stock Soars on Takeover Talk

Fueled by speculation of an acquisition by Avon Products Inc., the New York cosmetics firm made famous by its door-to-door saleswomen, Comprehensive Care Corp.’s stock shot up this week, posting a 26% gain in price by the close of trading Friday.

Rumors of an acquisition began circulating late last week. Although Avon officials refused to comment publicly on the reports, analysts said company executives privately denied any plans to acquire the Newport Beach-based operator of substance-abuse treatment centers.

B. Lee Karns, CompCare’s chairman and chief executive, declined to comment on both the acquisition rumors and the unusually heavy trading in the company’s stock.

CompCare stock began its upward spiral one week ago and closed at $22.13 a share Friday, up $4.63 from $17.50 a share on Dec. 12. Volume over the eight-day period totaled 3 million shares.

“It wouldn’t surprise me if they talked but maybe couldn’t work anything out,” said Lynn Hyman of New York-based Smith Barney, Harris Upham & Co. “Or maybe there is a deal pending, and they just aren’t talking.”

Several Wall Street analysts say that the acquisition would be a logical move for Avon because of CompCare’s strong earnings record and niche in the health-care industry. During the 12 months ended May 31, CompCare posted its 13th straight increase in yearly profits, reporting 1985 earnings of $17.2 million, compared with $14 million a year earlier.

“My feeling is that it would make a hell of an acquisition for Avon,” said Edward Gomoll, research director for Pacific Securities Inc. of San Francisco, who predicts that CompCare’s 1986 net earnings will total about $19 million. “I think you have a company that represents an attractive package for Avon.”