HealthSouth, a Birmingham, Ala.-based operator of inpatient rehabilitation hospitals, plans to spend $730 million to buy Richardson, Texas-based Reliant Hospital Partners.
A smaller peer, Reliant operates 11 inpatient rehabilitation hospitals in three states, Massachusetts, Ohio and Texas. HealthSouth will assume the leases on the 11 facilities.
Reliant in 2014 generated $249 million in revenue and $82 million in adjusted earnings before taxes and other items.
HealthSouth will spend cash and debt to fund the deal, which is expected to close later this year. Acquisitions have been at the core of the rehab company's strategy, but the impact on its earnings results has been muted so far. While its topline has benefited from higher volume, its net income has lagged as it incurs deal-related costs.
But this latest deal offers the potential for “cross-selling” opportunities between Reliant and Encompass Home Health and Hospice, the $750 million transaction that HealthSouth closed in January, said A.J. Rice, an analyst at UBS, in a note to clients. The two companies have significant geographic overlap, particularly in Texas.
Reliant's facilities also generate margins close to 33%, above the 28% to 29% at HealthSouth hospitals, Rice added.