HealthSouth Rehabilitation Corp.'s decision to buy ReLife for $180 million last week solidifies its position as the largest U.S. provider of rehab-ilitation services.
More importantly, the proposed deal would give HealthSouth 33% of the rehabilitation market along with a whopping 60% ownership in the Birmingham, Ala., market-which is home to HealthSouth's corporate headquarters.
But that doesn't appear to concern officials at the two companies.
"We don't think there are any undue problems" with federal antitrust laws, said HealthSouth Executive Vice President Anthony Tanner. "If you look at the locations of the facilities and what the marketplace is in terms of freestanding rehabilitation hospitals around the country, we don't see any problems."
ReLife operates 46 facilities in 12 states. HealthSouth is the nation's largest provider of rehabilitation services, operating in 336 locations 34 states.
ReLife, like HealthSouth, is based in Birmingham.
The deal remains subject to shareholder and regulatory approval. It is expected to be completed by the end of the year.
Under terms of the deal, HealthSouth would buy ReLife's stock for $24 per share.
ReLife's stock closed at $23.31, up $5.16, during heavy over-the-counter trading on Sept. 19-the day of the announcement. Its stock had been trading as high as $21.25 per share and as low as $11.25 per share over the past 12 months.
HealthSouth's stock closed at $37.75, up $1.25, on the New York Stock Exchange. Its stock has traded as high as $37.62 and as low as $14 per share over the past year.
"We're not worried about (potential antitrust issues) at all," said Michael Stephens, ReLife's president and chief executive officer. "It was a natural deal for both of us. We fit nicely in HealthSouth's voids."
HealthSouth operates five acute-care hospitals, one of which is located in Birmingham. ReLife, by comparison, operates 46 freestanding rehabilitation hospitals in 12 states, including one in Birmingham.
The agreement also expands HealthSouth into two new states, West Virginia and Indiana, and one city, Baton Rouge, La., Mr. Tanner said.
It's all part of the company's plan to become the major player in the rehabilitation market. HealthSouth earlier this year took a major step in that direction after it bought 28 rehabilitation hospitals and 45 outpatient clinics from National Medical Enterprises for about $300 million.
The deal elevated HealthSouth to the nation's largest U.S. rehabilitation chain (See related story, p. 68). It had been the fourth-largest chain.
The company's aggressive strategy has already helped boost profits.
For the second quarter ended June 30, HealthSouth's net income rose 44% to $13 million, or 41 cents per share, compared with $9.5 million, or 33 cents per share, in 1993. The company's revenues more than doubled to $247 million.
For the six months, HealthSouth's net income rose 38% to $25 million, or 78 cents per share, compared with $18.4 million, or 62 cents per share, in 1993. Revenues doubled to $478 million.