Kindred and Gentiva have been exchanging barbs since May, when Louisville, Ky.-based Kindred initiated a hostile takeover. Since then, Gentiva, an Atlanta-based home-health and hospice operator, has rejected several of Kindred's offers. Gentiva executives consistently said Kindred's proposals were “coercive” and undervalued the company.
Kindred, Gentiva agree to $1.8 billion merger
The cash-and-stock deal is valued at $1.8 billion, which includes Gentiva's approximately $1.1 billion of debt. Kindred will pay $19.50 per share to Gentiva shareholders, 17% higher than Gentiva's trading value on Wednesday. It's also more than double Gentiva's stock price of $8.54 from May, before Kindred made an offer. The deal includes $14.50 per share in cash and $5 of Kindred common stock.
Gentiva began seriously considering Kindred's advances in July, when Kindred said it would pursue a full acquisition of Gentiva at $17.25 per share. Kindred's offer at the time came in response to a new mystery bidder—only described as a “recognized owner, operator and investor in the sector,” which fueled speculation that a private-equity firm was the new suitor.
Kindred said once the deal closes, it will be the fourth-largest healthcare employer in the U.S. The combined company will have 109,000 employees in hundreds of long-term acute-care hospitals, inpatient rehabilitation facilities, skilled-nursing facilities and hospices.
“Over the last eight weeks, we undertook a robust due diligence process and worked closely and constructively with our counterparts at Gentiva to better understand their operations, financial results and outlook,” Kindred CEO Paul Diaz said in a release. “This process confirmed the compelling strategic rationale and industrial logic of this combination, as well as our belief that this transaction is in the best interests of both companies and our respective shareholders, patients, employees and business partners.”
Gentiva Chairman Rodney Windley, who ripped Kindred during the early takeover bids, struck a more neutral tone Thursday. “This merger represents a successful conclusion to a process in which, from the beginning, we have focused on maximizing value for Gentiva's shareholders consistent with our board's responsibilities, while ensuring the future success of the company,” Windley said.
The new company is expected to generate about $7.1 billion in annual revenue, making it larger than the other recent merger in the industry between Genesis HealthCare and Skilled Healthcare Group.
Kindred secured financing for the deal through Citigroup and JPMorgan Chase & Co., using common stock and unsecured notes. The merger also requires approval from Gentiva's shareholders and the federal government.
Kindred's shares were up about 8% in early morning trading, hovering around $21.25.
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