in healthcare, as firms bid last week to separately acquire Genesis HealthCare Corp., a long-term-care provider, and Symbion, an owner and operator of ambulatory surgery centers.
Just one week after Genesis announced a restructured agreement to be bought by affiliates of Formation Capital, Alpharetta, Ga., and JER Partners in McLean, Va., the provider company said it received a competing bid from Fillmore Capital Partners, a private equity firm headquartered in San Francisco. In the proposal, Fillmore offered to pay $64.75 per share for Kennett Square, Pa.-based Genesis, slightly above the earlier offer of $64.25 per share that Formation and JER Partners offered in their $1.7 billion deal, which also assumed $475 million in debt. The original agreement with Formation and JER Partners in January had called for $63 per share and $450 million in debt.
Genesiswhich provides services at more than 200 skilled-nursing centers and assisted-living residences in 13 Eastern statessaid it would consider the new offer relative to the pending transaction. Shareholders are expected to decide on the original merger agreement May 4.
Meanwhile, Nashville-based Symbion said it entered into a merger agreement with a newly formed subsidiary of Crestview Partners, a private equity firm based in New York. The total value of the transaction is about $637 million, which includes the assumption of debt. As part of the agreement, Symbion has until May 25 to actively solicit other possible bidders.
Symbion said the agreement calls for a $5 million termination fee be paid to Crestviews affiliate through May 25, and any time after that, it would be $12.5 million. The contract also stipulates that Crestview does not have to be advised of other proposals during a 14-day period through May 7.
And as in Genesis case, the bidding may not be over. Darren Lehrich, managing director of healthcare services research at Deutsche Bank in New York, said that while he thinks it would be a long shot for competitor AmSurg Corp., also in Nashville, to bid for Symbion, AmSurg ought to consider it.
From a strategic standpoint, AmSurg has, in our view, much too heavy exposure to the GI (gastrointestinal) specialty, which is expected to have some fairly significant reimbursement cuts that should start in 2008, Lehrich said. And what Symbion would offer to AmSurg in that regard is a little more of a diversified mix of specialties outside of GI.
Still subject to shareholder approval, the deal is expected to close in the third quarter. Kenneth Mitchell, senior vice president and chief financial officer at Symbion, said more information will be available after the company files its first-quarter financial and proxy statements in the next 30 to 45 days.
The interest in both companies is emblematic of a broader move by the private equity market to turn its attention to healthcare. A year ago, we would have said that healthcare was generally underrepresented in LBOs (leveraged buyouts) and now its all catching up, Lehrich said. There continues to be good activity in this area.