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Kindred CEO Paul Diaz
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Kindred ups Gentiva bid to $17.25 a share, countering mystery suitor


By Beth Kutscher
Posted: July 21, 2014 - 7:30 pm ET
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Kindred Healthcare, determined to acquire Gentiva Health Services, has fired back against Gentiva's claim last week that it has a mystery white knight bidder in the wings. Kindred said Monday that it is prepared to counter the $17.25-per-share bid from the unnamed, third-party bidder to secure a takeover of Gentiva.

The letter from Kindred CEO Paul Diaz comes one week after the post-acute-care provider already had increased its offer for a portion of Gentiva shares to $16 a share, but said it would not go any higher.

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Last Thursday, Gentiva shot down the higher Kindred bid. The Atlanta-based home health and hospice operator said it has another suitor waiting in the wings with a $17.25 per share offer, worth about $635.5 million before the assumption of debt. It described the bidder only as a “recognized owner, operator and investor in the sector”; analysts speculated that the party is most likely a private-equity firm.

Market watcher speculation immediately formed around four private-equity firms as the possible mystery bidder: GTCR, Cressey & Co., Formation Capital and Wall Street powerhouse Kohlberg Kravis Roberts & Co. All meet the criteria Gentiva outlined for its unknown suitor.

In his letter to Gentiva Executive Chairman Rodney Windley and CEO Tony Strange, Kindred’s Diaz said his company would meet the higher price, provided it could conduct due diligence on the company.

For Kindred, a tie-up with Gentiva would allow it to offer a broader continuum of care, serving 127,000 patients per day in 47 states. The Louisville, Ky.-based company also is projecting $60 million to $80 million in savings from cost reductions from the deal.

But Gentiva has continually insisted that Kindred had low-balled its early offers, which started at $14 per share in May. In response, Kindred took a $14.50 bid to shareholders and launched a tender offer to acquire a 14.9% stake, the maximum allowed before it would run into Gentiva’s poison pill, or shareholder rights plan.

When few shareholders supported that offer, it sweetened the pot yet again to $16 and extended the timeline to July 28. The latest offer would allow the companies to enter their own negotiations for a transaction.

Emergence of the mystery bidder left Kindred with a difficult choice: either walk away from Gentiva and watch a possible competitor buy a company it wanted and outflank it in the healthcare marketplace or swallow hard and raise its bid.

Gentiva shares closed today at $17.95, and are trading after hours at $18.

Follow Beth Kutscher on Twitter: @MHbkutscher


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