Kin­dred-Gen­tiva deal may spur re­forms

Modern Healthcare - - NEWS - By Bob Her­man

End­ing a month­s­long bat­tle, Kin­dred Health­care and Gen­tiva Health Ser­vices an­nounced they will merge, cre­at­ing one of the largest post-acute-care providers in the coun­try. In­dus­try ob­servers hope the merger will help ac­cel­er­ate the move­ment to­ward co­or­di­nated care in the cur­rently frag­mented post-acute-care sec­tor.

Louisville, Ky.-based Kin­dred said once the deal closes, it will be the coun­try’s fourth-largest health­care em­ployer, with 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 news re­lease.

The new company is ex­pected to gen- er­ate about $7.1 bil­lion in an­nual rev­enue, mak­ing it larger than another re­cent in­dus­try merger be­tween Gen­e­sis Health­Care and Skilled Health­care Group.

Rod­ney Windley, chair­man of At­lanta-based Gen­tiva, who ripped Kin­dred dur­ing the early takeover bids, said the 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 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. 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.

Pol­i­cy­mak­ers and in­sur­ers are push­ing for more cost con­trol and care co­or­di­na­tion in the post-acute sec­tor, where costs have been grow­ing faster than other health­care costs.

Pend­ing Gen­tiva share­holder ap­proval, the trans­ac­tion is ex­pected to close in the first quar­ter of 2015. Kin­dred’s shares were up about 6% since it an­nounced the deal on Oct. 9, hov­er­ing around $21.


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