Kindred To Buy Gentiva For $19.50 A Share - Update

(RTTNews) - Kindred Healthcare Inc (KND) Thursday agreed to buy Gentiva Health Services Inc (GTIV) for $19.50 per share in cash and stock. Inclusive of debt, the deal is valued at $1.8 billion.

As per the terms, Kindred will pay Gentiva shareholders $14.50 per share in cash and $5 of Kindred common stock.

The deal has been unanimously approved by the boards of both companies and is expected to close in the first quarter of 2015. The deal is still subject to approval by the stockholders of Gentiva.

Kindred's $19.50 per share offer represents a 17 percent premium to Gentiva's closing price on Wednesday.

Following the announcement, Gentiva shares gained more than 16 percent on the Nasdaq, while Kindred shares gained about 4 percent on the New York Stock Exchange.

The deal brings to an end months-long effort by Kindred that repeatedly sweetened its offer for Gentiva.

In May, Louisville, Kentucky-based Kindred made a hostile bid to buy Gentiva, a provider of home health and hospice services, for $14 per share in a cash and stock deal valued at about $533 million. Gentiva spurned the deal and went ahead with a poison pill to thwart any takeover.

Kindred sweetened and amended its offer, proposing to buy only a 14.9 percent stake in Gentiva for $14.50 a share, which was sweetened to $16 per share. Gentiva rejected the bid and said it received an alternative proposal from a recognized player to buy the whole of Gentiva for $17.25 per share in cash.

With the deal in place, Kindred said that on a pro forma basis, the combined company is expected to generate annual revenue of $7.1 billion and EBITDAR, including expected synergies, of $1 billion.

Kindred expects the deal to be accretive to pro forma earnings by $0.40 to $0.60 per share, and pro forma operating cash flows of $350 million to $400 million, once Gentiva is fully integrated and expected synergies are realized in the second full year following the closing.

Kindred has identified about $70 million of annual cost and operating synergies and expects to achieve the full run rate within two years of closing.

Kindred has obtained committed financing from Citi and J.P. Morgan in connection with the deal. The company expects to finance the deal 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.

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

Gentiva stock is trading at $19.49, up $2.78 or 16.64%, on a volume of 3.8 million shares on the Nasdaq.

Kindred Healthcare is trading at $20.59, up $0.85 or 4.31%, on a volume of 3.8 million shares on the NYSE.