Kennett Square, Pa.-based Genesis Health Ventures last week partnered with two investment firms to form a new company, which will acquire Hackensack, N.J.-based Multicare in a $1.04 billion cash-tender offer and assume $342 million of its debt.
Genesis said it created Genesis ElderCare Acquisition Corp. with backing from New York-based Cypress Group and Fort Worth, Texas-based Texas Pacific Group.
Under the partnership agreement, Genesis will invest $300 million in the new company in exchange for a 42% ownership stake while the investment firms will invest a total of $420 million for a 58% stake.
The new company will operate as a subsidiary of Genesis, which will have the option to acquire the equity held by the investment firms in four years.
The acquisition of Multicare for $28 per share will be the new company's first. The deal has been approved by both companies' boards and is expected to close during the third quarter of 1997.
Multicare owns, leases or manages 155 long-term-care facilities in 11 states in addition to an institutional pharmacy and other ancillary businesses. It projects 1997 revenues of $675 million.
Genesis said it will manage Multicare's operations for an annual fee of 6% of total revenues, under a multiyear contract with the acquisition partnership. All Multicare services and products will be branded under the Genesis ElderCare banner.
The purchase agreement also calls for Multicare's institutional pharmacy business to be operated under a joint venture with Genesis' pharmacy operations. In addition, Genesis will acquire Multicare's rehabilitation therapy business, which projects 1997 revenues of $20 million.
"As a result of this transaction, we have established a contiguous market concentration from New Hampshire down the Eastern corridor to Washington, D.C.," said Michael Walker, Genesis chairman and chief executive officer. "Our management agreement will allow us to fold Multicare's operations into our Genesis ElderCare networks and enable us to deliver the high-quality, cost-effective, integrated care demanded in today's managed-care environment."