In a move mirroring the mega merger of Brookdale-Emeritus, home health juggernaut Kindred Healthcare, Inc. (NYSE:KND) has its sights set on acquiring a major competitor Gentiva Health Services, Inc. (NYSE:GTIV) in a deal valued at $1.6 billion.
Under the proposal, Kindred would acquire all of the outstanding shares of common stock of Gentiva for a combination of $7.00 per share in cause and $7.00 of Kindred common stock.
Gentiva is the second largest provider of home health care with a 4.76% market share, according to 2013 rankings from Health Market Science, a firm that collects and analyzes healthcare provider data in the U.S. Kindred currently ranks No. 6 on the same list, with market share of 1.03%.
The combination of the companies would further increase Kindred’s national network, resulting in an expanded population of serving 127,000 patients per day with operations in 47 states—making it a dominant presence in the post-acute space.
“This compelling combination would unite two highly competitive businesses by joining Kindred’s resources with Gentiva’s home health and hospice capabilities,” stated Kindred CEO Paul Diaz. “The combined company’s national footprint would allow it to deliver enhanced coordinated care, helping to transition patients home more quickly and provide more patient-centric, cost-effective treatment.”
Gentiva, however, is not on board with the proposal.
In a letter dated May 13, 2014, Gentiva executives—including CEO Tony Strange, Executive Chairman Rodney Windley and Lead Director Victor Ganzi—returned correspondence to the Kindred CEO’s proposal via letter, saying the company was not interested in pursuing the acquisition Kindred is proposing.
“Having considered your proposal, our Board continues to believe that our long-term strategy as a stand-alone company will generate substantially more value to our shareholders,” stated the letter to Kindred’s Diaz. “Accordingly, at this time, we are not interested in pursuing the transaction you are proposing.”
If the transaction were to follow through, Kindred expects the combined company would have operating and financial synergies of approximately $60 million to $80 million within two years following the acquisition, with $40 million expected in the first year of closing.
For Gentiva, the deal is expected to provide company shareholders with consideration currently valued at $14.00 per share, representing a 64% premium over the closing price of the company’s stock on May 14, 2014.
Kindred’s management team will hold a conference call Thursday to discuss the proposed transaction.
Written by Jason Oliva