ARV Settles Legal Disputes With a 48% Shareholder

ARV Assisted Living Inc., a Costa Mesa developer of housing for the elderly, said it settled all outstanding legal disputes with a Lazard Freres & Co. affiliate that owns 48% of ARV.

The settlement ends more than a year of uncertainty about the future of ARV, which has sent its stock price plunging 63% over the last 12 months. The relationship between the two soured in April 1998 when the Lazard affiliate agreed to buy ARV competitor Atria Communities Inc.

ARV responded by filing lawsuits against Lazard Freres Real Estate Investors and implemented a “poison pill� anti-takeover plan to prevent an acquisition by Lazard.

The settlement is important for ARV because it will allow the company’s management to focus on boosting the stock price at a time when investors are skittish about investing in assisted-living companies. Such companies develop homes that offer special services for the elderly, including limited medical care.

“This alleviates a major management distraction,� said Frank G. Morgan, a J.C. Bradford & Co. analyst who follows the assisted-living industry. “It will cut legal fees and increase the flexibility of the company as it explores ways to create shareholder value.�

Shares in ARV and rival assisted-living companies like CareMatrix Corp. and Sunrise Assisted Living Inc. sank this year amid concerns about an unfavorable government report on the industry.

The General Accounting Office report, released in April, cited more than 25% of assisted-living facilities in the United States for at least five quality-of-care and consumer protection problems.

Assisted-living companies are looking to alleviate such concerns, increase earnings and boost their share prices. Now that the legal dispute is resolved, ARV said it will work with Lazard to meet those challenges.

“We look forward to having their support as an investment partner with a mutual interest in pursuing operational and strategic initiatives designed to strengthen the company’s financial position,� said ARV Chief Executive Douglas M. Pasquale, in a prepared statement.

Lazard Freres Real Estate Investors Chief Executive Michael G. Medzigian said his company is “excited about the opportunities this agreement creates for renewed cooperation between ARV and Lazard.�

ARV announced the settlement, which was reached Wednesday, in a Securities and Exchange Commission filing that was made after the close of U.S. stock exchanges. Its shares closed at $2.50 on Thursday, unchanged. They were trading for about $14 in May 1998, when ARV disclosed that it filed a lawsuit against Lazard Freres.