Kindred Healthcare To Buy Gentiva Health Services For $1.8 Bln, Incl. Debt

(RTTNews) - Kindred Healthcare Inc. (KND) and Gentiva Health Services Inc. (GTIV) announced that they have entered into a definitive merger agreement by which Kindred will acquire all of the outstanding shares of Gentiva common stock for $19.50 per share in a combination of cash and stock. The transaction is valued at $1.8 billion, including the assumption of net debt.

The agreement was unanimously approved by the boards of directors of both companies.

As per the terms of the agreement, Gentiva shareholders will receive $14.50 per share in cash and $5.00 of Kindred common stock, which equates to 0.257 shares of Kindred common stock based upon an agreed upon fixed exchange ratio.

The companies expect the closing of the transaction to occur in the first quarter of 2015.

On a pro forma basis, the combined company is expected to generate annual revenues of approximately $7.1 billion and EBITDAR, including expected synergies, of $1.0 billion.

Kindred expects the acquisition to be approximately $0.40 to $0.60 accretive to pro forma earnings, and pro forma operating cash flows of $350 million to $400 million (before capital expenditures, dividends and changes in working capital), both on a run rate basis, once Gentiva is fully integrated and expected synergies are fully realized in the second full year following the closing.

Kindred has identified approximately $70 million of annual cost and operating synergies and expects to achieve the full run rate within two years of closing, of which approximately $35 million is expected to be achieved in the first year following the closing.

Kindred noted that it has obtained committed financing from Citi and J.P. Morgan in connection with the pending transaction. Subject to market and other conditions, the Company expects to finance the acquisition of Gentiva and associated costs through the issuance of $200 million to $300 million of common stock and mandatory convertible equity securities and $1.3 billion to $1.4 billion of unsecured notes prior to the closing of the acquisition. The Company expects to fund the remaining amounts through its existing line of credit.

Following completion of the transaction, Kindred expects to have approximately 85 million fully diluted shares outstanding, comprised primarily of approximately 64 million shares outstanding today, approximately 10 million shares to be issued to Gentiva as part of the transaction consideration, and approximately nine million to 12 million shares associated with the expected offering of common stock and mandatory convertible equity securities.

The combined company will continue to be headquartered in Louisville, Kentucky and will maintain a significant, regional presence in Atlanta, Georgia. The combined home health and hospice businesses will operate within the Kindred at Home division.

The Gentiva acquisition is subject to certain conditions, including the approval by the stockholders of Gentiva. Kindred and Gentiva have already received clearance for the transaction under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.