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Kindred makes final offer for Gentiva as few shareholders agree to lower price


By Beth Kutscher
Posted: July 14, 2014 - 12:15 pm ET
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Kindred Healthcare has increased its offer for Gentiva Health Services to $16 per share, what it's calling its final offer for the reluctant home health and hospice company.

The Louisville, Ky.-based post-acute-care operator also extended the deadline on its tender offer, giving investors an additional 12 days to consider the proposal.

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Gentiva said its board has a fiduciary duty to review the new offer with its financial advisors but urged shareholders to take no action until it completes that process. In a statement, it pointed out that the latest bid is just $0.18 above Friday's closing share price.

This is the second time Kindred has sweetened the pot. Gentiva's board rejected the two previous offers of $14 and $14.50 per share.

Kindred last month took its $14.50 per share bid directly to shareholders through a tender offer. But Gentiva's shares immediately began trading above the offer price, forcing Kindred to increase the proposal two days before it was due to expire this Wednesday.

Kindred on Monday disclosed that about 341 shares had been tendered as of 5 p.m. New York time Friday. Gentiva had about 36.8 million shares outstanding as of March 7, according to its most recent quarterly financial filing.

The latest tender offer expires on July 28. If a minimum of 5.5 million shares are tendered into the offer, Kindred will purchase a 14.9% stake, the maximum allowed under Gentiva's shareholder rights plan, which was put in place to prevent the hostile takeover.

Kindred also will need antitrust approval for the stake purchase.

Throughout the back-and-forth between the two companies, analysts have insisted that the offer is attractive because it would provide capital to a highly indebted Gentiva. It also takes into account the reimbursement risks that continue to loom over the home health and hospice industry.

For Kindred, combining with Gentiva would allow it to offer a more complete continuum of post-acute-care services.

“In our opinion, it will be extremely difficult for GTIV (Gentiva) not to come to the table,” Chris Rigg, an analyst at Susquehanna, wrote in a research note Monday morning. “The current takeout price greatly increases the downside risk for GTIV shareholders if GTIV management once again balks at the offer price.”

Gentiva rejected the previous offers as undervaluing the company and exploiting what it described as a temporary decrease in its share price as it integrates last year's acquisition of Harden Healthcare. The company last week released a preview of second quarter financial results to highlight its improving performance.

Yet in a news release Monday, Kindred emphasized that Atlanta-based Gentiva's shares have not traded above $16 since July 29, 2011.

The latest offer represents an 87% premium to Gentiva's closing share on the day before Kindred's interest in the company was made public, it said.

Paul Diaz, Kindred's CEO, said in the release that while certain terms may still be negotiable—such as the mix of cash and stock—the company will not consider increasing the price.

“Kindred has a robust pipeline of external growth opportunities and organic initiatives that we are pursuing in parallel with the Gentiva offer,” Diaz said in the statement. “If the 14.9% minimum tender condition is not met, we will withdraw our offer, and if the Gentiva board remains unwilling to commence discussions, we will turn our attention toward these other avenues for value creation.”

Follow Beth Kutscher on Twitter: @MHbkutscher


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