Gentiva Health Services
' board of directors Thursday announced it had officially rejected Kindred Healthcare's
$14-a-share stock and cash takeover offer for its Atlanta-based home-health and hospice company.
“The Board concluded that the Kindred proposal significantly undervalues Gentiva and its attractive prospects for growth and value creation,” Gentiva said in a statement.
“Our Board and our highly capable management team are confident that we can create significantly greater value for our shareholders by continuing to execute our One Gentiva initiative, along with the balance of our strategic plan. Our focus is on Gentiva shareholders, who would be denied the value they deserve and can expect to receive as we capitalize on our strong positioning in Home Healthcare, Hospice and Community Care,” said Rod Windley, Gentiva's executive chairman.
Gentiva also disclosed that Kindred had first approached it with an unsolicited takeover proposal April 14 and that it has been working with Greenberg Traurig, as its legal adviser and Barclays Capital and Edge Healthcare Partners as its financial advisers on this second offer.
Kindred's $1.6 billion bid, made public Thursday morning, but delivered to Gentiva May 5, represents a 64% premium to Gentiva's closing share price Wednesday. Louisville, Ky.-based Kindred said it is willing to negotiate an all-cash transaction as well. Gentiva shares closed at $13.83 Thursday, up 61.94% for the day.
Post-acute-care operators have struggled in recent quarters because of reimbursement cuts. Home-health operators in particular are currently in the first year of 14% rate rebasing that will be phased in over four years. The industry also has faced heavy regulatory scrutiny.
In light of those circumstances, analysts expect consolidation
in the sector, and generally found the Kindred deal a favorable one for Gentiva shareholders.
Gentiva's rejection of the offer is a “meaningful error on management's part,” Sheryl Skolnick, an analyst at CRT Capital Group, wrote in a research note. “Our long experience tells us that it would take (Gentiva's) management a very long time to create that kind of increase in value,” she wrote.Follow John N. Frank on Twitter: @MHJFrank