Gentiva had rejected a prior $16-per-share offer from Kindred, calling it “coercive.” Kindred has aggressively pursued Gentiva, a home health and hospice operator, in seeking to create a more comprehensive system of post-acute-care services. But Gentiva has consistently rejected every Kindred overture.
Gentiva said a “recognized owner, operator and investor in the sector” offered the company $17.25 per share in cash. The deal would be worth more than $635 million, based on the number of company common shares outstanding as of July 17, but Gentiva still must review it. Gentiva officials have been tight-lipped about the bidder's identity since the announcement.
“Private equity would make some sense,” said Toby Wann, founder of Obsidian Research Group. Gentiva would align well with a firm that has a portfolio of several post-acute providers—such as long-term acute-care hospitals, skilled-nursing facilities and inpatient rehabilitation facilities.
With that portfolio in mind, Ellich released a research note Thursday suggesting three specific private-equity firms that could be behind the new proposal: GTCR, Cressey and KKR. GTCR owns Curo Health Services, a hospice operator. Curo's CEO, Larry Graham, previously was president of Amedisys, which has been a rumored takeover target for Gentiva.
Cressey has stakes in several providers, including Encompass Home Health, Select Medical and Hospice Compassus. KKR is more of a long shot, Ellich said, but the company does own almost 30% of Amedisys' outstanding shares, according to Morningstar.
In an interview Friday, Ellich said Formation Capital also could be in the running. Formation has several healthcare investments, including Genesis HealthCare, a privately held provider of post-acute and senior-care services headquartered in Kennett Square, Pa.
None of the private-equity firms returned calls for comment.
Wann said it's also “within the realm of possibility” that a large integrated health system could be making a run at Gentiva, since a home health operator could help a system that wants to further reduce readmissions rates and the penalties associated with them, he said.
The news has put pressure on Kindred, which now must evaluate whether it wants to place another offer or walk away from the pursuit it initiated this past spring.
“The last time I spoke with the folks at Kindred, they seemed very determined,” Wann said. “They wanted to consummate a transaction with Gentiva and build an integrated post-acute-care delivery services provider.”
The bidding war has placed a higher price tag on Gentiva, which recorded more than $1.7 billion in revenue last year. Analysts agree the latest offer is over Gentiva fair market value, especially since the company has more than $1.1 billion of debt.
“Increasing the equity component of this deal doesn't move the valuation multiple too much because Gentiva has so much leverage,” Ellich said.
Gentiva's shares closed at $17.90 late Friday, almost 16% higher than Thursday's close and more than double their early May level. —Bob Herman
Follow Bob Herman on Twitter: @MHbherman
