In a deal that would create the country's largest long-term-care company in terms of market capitalization, Manor Care and Health Care and Retirement Corp. last week announced plans to merge in a transaction valued at $5 billion, including the assumption of debt.
Both Toledo, Ohio-based HCR and Gaithersburg, Md.-based Manor Care are publicly traded, for-profit companies.
The combined company, to be called HCR Manor Care and based in Toledo, will have a 32-state network with nearly 300 long-term-care facilities and dozens of other facilities (See chart).
While Fort Smith, Ark.-based Beverly Enterprises still has the most long-term-care facilities, HCR Manor Care will be largest in terms of market capitalization. Beverly operates 569 skilled-nursing facilities as well as assisted-living centers, outpatient clinics, home health agencies and hospice programs.
As of May 31, Beverly had a market capitalization of more than $1.5 billion. Together, HCR and Manor Care had a market capitalization of more than $3.7 billion, according to Morningstar data.
The companies have filed for antitrust approval but do not foresee any problems, said Geoffrey Meyers, HCR's executive vice president and chief financial officer. The transaction, subject to regulatory approval, is expected to be completed during the fourth quarter.
Manor Care will exchange one share of its stock for one share of HCR. Because HCR stock prices are higher, Manor Care shareholders will receive a premium.
Manor Care stock jumped to $35.56 on June 10, the day the merger was announced, from $31 the previous day. HCR's shares decreased slightly to $37.13 from $37.75 during the same period.
"You've got two premier companies that create something greater than what they were individually," Meyers said.
Within the first full year after consolidation, the combined company expects to save at least $30 million. Meyers said HCR Manor Care will reduce staff and trim its office space in the Gaithersburg area. The biggest savings will come from combining computer systems for administrative serv-ices such as payroll, he added.
However, all the operating facilities will remain open and the company will pursue "a fairly aggressive development program," he added.
Because of the merger, Manor Care will cancel its planned separation into a healthcare management services organization and a real estate and development company. Manor Care had announced its plans to create the two companies in September 1997 (Sept. 22, 1997, p. 17).
HCR Manor Care will have a joint board with five representatives from each company. Stewart Bainum Jr., Manor Care's chairman and chief executive officer, will become chairman of the combined company. Paul Ormond, HCR's chairman, president and CEO, will be president and CEO of the combined company.