By Maria Armental
Skilled Healthcare Group Inc. (SKH) has agreed to merge with
Genesis HealthCare in an all-stock deal that expands Genesis'
geographic reach and creates the second largest contract therapy
provider, according to a filing with the Securities and Exchange
Commission.
The move comes at a time when improved state budgets and higher
federal reimbursement rates have resulted in a favorable
environment for skilled nursing providers.
Under the terms of the agreement, Skilled Healthcare
shareholders will own 25.75% of the combined company, while Genesis
HealthCare shareholders will own 74.25% of the company.
In the filing, Genesis said it had obtained an aggregate of
about $1.15 billion in debt financing commitments.
Skilled Healthcare's market value at Monday's close was about
$151 million based on the number of Class A shares outstanding as
of Aug. 8. Shares surged 48% to $9.11 after hours.
Including Class B shares, Skilled's market capitalization is
about $241 million.
The deal is expected to close in early 2015 and result in about
$25 million in savings from such things as vendor repricing and
contract consolidation, elimination of duplicate positions and
information system integration.
"The combination will expand our core business lines,
significantly diversify our markets, provide opportunities for
increased efficiency and enhance our collective ability to provide
the highest quality patient care," said Robert Fish, Skilled
Healthcare's chief executive.
The combined company, with more than $5.5 billion in revenue and
more than 95,000 employees in some 500 facilities across 34 states,
will operate under the Genesis HealthCare name and will be based at
Genesis's offices in Kennett Square, Penn.
Genesis Chief Executive George V. Hager Jr. will serve as the
head of the combined company and Genesis Chief Financial officer
Tom DiVittorio will become the combined company's CFO.
Genesis, one of the nation's largest provider of skilled
nursing, was formed in 2003 in a tax-free spin-off from Genesis
Health Ventures, which traces its roots to the mid-1980s, according
to the company's website. In 2007, it agreed to be taken private in
a $1.9 billion deal by Formation Capital LLC and JER Partners.
Write to Maria Armental at maria.armental@wsj.com
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