Vencor, a leading long-term-care provider, said it has agreed to buy TheraTx, an Atlanta-based therapy services provider, for $354 million in a cash tender offer.
Louisville, Ky.-based Vencor said it will begin purchasing the 20.7 million outstanding shares of TheraTx on Feb. 14. The deal is expected to be completed within 90 days.
TheraTx will become a wholly owned subsidiary of Vencor. For the nine months ended Sept. 30, 1996, TheraTx reported revenues of $288.6 million. For the same period, Vencor posted revenues of $1.9 billion.
James H. Gillenwater, Vencor's senior vice president of acquisitions and development, said his company currently has three major lines of business: long-term acute-care hospitals, skilled-nursing facilities and contract therapy services.
Vencor operates 38 long-term acute-care hospitals, 319 skilled-nursing facilities, and 23 independent- and assisted-living communities. Its Vencare division sells physical and respiratory therapy and pharmacy services to 4,000 skilled-nursing facilities.
Gillenwater said TheraTx will bolster Vencor's contract-services and skilled-nursing businesses. TheraTx owns 28 nursing homes and manages rehabilitation and therapy programs in 216 skilled-nursing facilities. It also provides occupational health services and sells medical supplies to long-term-care facilities.
"Combining these services with Vencor's existing base of contract services will enable Vencor to offer a comprehensive, integrated program of contract services to healthcare providers," said Bruce Luns-ford, Vencor's chief executive officer.
Gillenwater said Vencor is aggressively pursuing the expansion of its contract-services division because it's the company's highest growth segment and also produces the highest margins.
He said TheraTx will expand Vencor's contract-therapy network and also contribute an advanced information system for contract therapy that will help the company track patient outcomes, services, and financial data required for Medicare reimbursement purposes and for monitoring the efficiency of care under capitated arrangements.
Gillenwater said TheraTx also had appeal as an acquisition target because almost half its nursing homes are in Florida and Georgia, where Vencor wants to expand its holdings.
John Runningen, an analyst with Atlanta-based Robinson-Humphrey Co., said the deal will create synergies between the two companies.
"The agreement ought to accelerate the number of their contracts for third-party nursing home administration," he said.