Hoping to create the nation's second-largest long-term-care company, Living Centers of America and GranCare last week unveiled plans to merge in a deal valued at $1.8 billion.
The merger of Houston-based LCA and Atlanta-based GranCare would establish a long-term-care company with anticipated pro forma annual revenues of $1.9 billion. The industry leader, Fort Smith, Ark.-based Beverly, had 1995 revenues of $3.2 billion.
The new LCA-GranCare company would operate more than 330 long-term-care facilities in 21 states. The company's name, headquarters location and executive team are expected to be announced within six weeks.
Under the agreement, LCA shareholders will receive $40.50 per share in cash for 93% of LCA's common stock and will hold onto 7% for recapitalization purposes.
As part of the recapitalization, New York-based Apollo Management will invest $200 million to purchase 4.9 million newly issued shares of LCA common stock at $40.50 each.
When the recapitalization is completed, GranCare will merge with LCA. Each outstanding share of GranCare common stock will be exchanged for 0.25 of a share of common stock of the recapitalized LCA.
The transaction is expected to close in the third quarter. GranCare will own 49.5% of the new company, Apollo will own 39.3%, and LCA shareholders will own the remaining 11.2%.
The new company's board of directors will include two representatives from LCA, four from GranCare and four from Apollo. Its management team will be made up of executives from both GranCare and LCA.
`'Having a strong equity partner like Apollo will give us better access to capital so we can play a significant part in the consolidation of the long-term-care industry," said GranCare Chairman Gene Burleson.