$1.67-Billion Deal for AMI Is Completed : Buyout: The Beverly Hills hospital chain plans to sell some facilities to offset acquisition costs.

American Medical International plans to sell some medical facilities and eliminate part of its corporate staff to reduce the debt created Thursday when IMA Acquisition Corp. completed its $1.67-billion buyout of the Beverly Hills-based hospital chain.

The plans for cost cutting and asset sales were disclosed by AMI Chairman Richard Gilleland during an interview Thursday, the chief executive’s first public discussion of the deal since AMI agreed to the buyout July 6. IMA was formed to buy AMI by First Boston Corp. and Harry Gray, Mel Klein & Partners, a firm backed Chicago’s wealthy Pritzker family. Gilleland, AMI’s chairman and chief executive, has agreed to remain in those positions.

Gilleland said AMI plans to sell all of its 23 foreign hospitals and an undetermined number of its 48 U.S. hospitals to offset acquisition costs. The deal was completed when IMA’s tender offer deadline expired.

The most needy U.S. hospitals--facilities that need financing for renovation and improvements--are more likely to be placed on the block, Gilleland said during the interview. The company will make decisions after reviewing its U.S. facilities, he said. AMI, the nation’s third-largest hospital chain, has 11 hospitals in California and medical facilities in 13 other states.

“We’ll probably sell about 10 domestic hospitals,” said Gilleland. “We’re trying to narrow down. We’re going to manage acute care hospitals in mostly suburban areas and mostly in Sunbelt states in areas where we have a competitive advantage.”

Gilleland also said AMI will cut an undetermined part of its 1,500-member administrative staff. About half of that staff is located in Beverly Hills, Marina Del Rey and Orange County and the rest in Houston, Tampa, Fla., and Atlanta. Gilleland said AMI’s new board will begin to assess personnel needs in the next two weeks.

“Because we’ll have fewer hospitals domestically and internationally, we’ll need fewer people,” Gilleland said.

On the other hand, personnel at remaining AMI hospitals will not be affected by the deal, Gilleland said. AMI has about 40,000 hospital employees, less than 1% of whom are unionized. Doctors are self-employed.

Anne Clarke, president of the bargaining unit for Local 535 of Service Employees International--which represents 230 of the 310 nurses, therapists and social service workers at AMI’s Tarzana Regional Medical Center--said she expects AMI to retain the facility.

“We’ll be glad when the cost cutting is done,” she said.

The cost-reduction program could hit a snag if AMI puts too high a price tag on its properties, said Seth Shaw, an analyst at Prudential-Bache.

“They want to recover a certain amount of money by selling hospitals,” he noted. “They may have to sell off half of their domestic properties. It’s a buyer’s market out there. There are few buyers and plenty of sellers.”

The AMI deal is the second-most expensive acquisition of a U.S. health-care company. IMA will pay $23 a share in cash plus new stock that analysts value at $1.50 to $2 a share. IMA will also assume $1.4 billion of AMI debt. The size of the buyout is surpassed only by a $3.6-billion management buyout of the Nashville-based Hospital Corp. of America in 1988.

The acquisition marks the end of a multiparty courtship that began in March, when Dr. M. Lee Pearce--an AMI board member at the time--and Los Angeles-based Shamrock Investments proposed to buy the company for $1.7 billion. When the New York takeover firm of Clayton & Dubilier officially joined Pearce in June, the group revealed commitments from two big investment banks.

But in early July, AMI opted for a $1.9-billion bid from IMA. However, citing financing problems, IMA lowered the bid to $1.67 billion in October. A source at First Boston said the investment group amended its bid because a tax bill in Congress at the time would have made the buyout more costly.

IMA’s financing problems on the initial bid may have stemmed from the skittish junk bond market, some industry analysts have said. First Boston had originally planned to finance part of the purchase with about $712 million in these high-yield, high-risk bonds. The current deal will be financed with $578 million in junk bonds. IMA will invest $285 million. First Boston will provide $100 million of that equity and the Harry Gray group will provide $185 million.

“It’s been a busy time,” said Gilleland, reflecting on the past 10 months. “There probably isn’t a person involved in this process who isn’t tired and worn out. There’s no sense of remorse. . . . I think the mood here is upbeat. We’re looking for a future that is well focused.”