“Paul and I are friends. There was no animosity over this deal,” Windley said. “It was all a process to drive maximum value for our shareholders.”
Kindred's initial takeover attempt came at a time when Gentiva was highly vulnerable. The company was hemorrhaging money like many others in the Medicare-dependent home health and hospice industry. The Patient Protection and Affordable Care Act calls for cuts to home health payments over four years. Those reimbursement challenges partially spurred Gentiva to lay off many employees and close 46 facilities in the fourth quarter of last year.
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Additionally, Gentiva was still in the process of integrating post-acute company Harden Healthcare, which it acquired last year.
The turning point of negotiations was when the new suitor entered the fray in July, Windley said. (Due to confidentiality agreements, he said he still could not disclose who the bidder was.) At the time, the mystery buyer was willing to pay about $635 million in cash to take over Gentiva, far above Kindred's offer. From there, Kindred matched, and the three parties entered due diligence to figure out what deal made the most sense.
“We finally got to a point where I believe that we had maximized value for our shareholders,” Windley said.
In a separate interview, Kindred Chief Operating Officer Ben Breier said the company “never really paid much attention to the other suitor” and that their focus was how Kindred and Gentiva could find the right value of the deal.
Pending Gentiva shareholder approval, and perhaps a couple more salad lunch meetings, the transaction is expected to close in the first quarter of 2015.
Follow Bob Herman on Twitter: @MHbherman