To be acquired by Kindred for $19.50/shr in cash and stock (total $1.8B)
Under 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 transaction is valued at $1.8 billion, including the assumption of net debt. The companies expect the closing of the transaction to occur in the first quarter of 2015.
The Gentiva footprint overlaps in 20 of 23 of Kindreds current and targeted Integrated Care Markets, which are among the top 30 Metropolitan Statistical Areas in the United States. Kindred expects this will create significant benefits for patients from improved care transitions and potential revenue synergies for the Company from referrals across the combined care delivery platform.
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. Kindreds revenue and margin growth profiles will also be significantly enhanced by the combination.Immediately and Significantly Accretive: Kindred expects the acquisition of Gentiva will be immediately and significantly accretive to earnings and operating cash flows, exclusive of transaction and integration costs. 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)3, 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. On this same basis, following the combined companys expected annual maintenance capital expenditures of $120 million to $130 million, Kindred expects pro forma cash flows (before growth capital expenditures, dividends and changes in working capital) of $230 million to $270 million.
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 expects the majority of cost synergies to be achieved through combining information technology functions, merging supply chains and eliminating redundant public company expenses. In addition, Kindred expects to realize revenue synergies that will improve patient care transitions and choice, and drive volume growth as a result of cross-selling across the combined service platform. Kindred expects annual run rate revenue synergies of more than $60 million over time, with approximately $20 million to $30 million achievable in the first full year following the closing.Kindred 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 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.
The companies expect to complete the transaction in the first quarter of 2015.