Gentiva Health Services Inc.
) rejection of the takeover proposal from
Kindred Healthcare Inc.
) is hitting headlines and drawing investor attention to the
healthcare space. Post discarding the unsolicited bid made by
Kindred, shares of Gentiva skyrocketed 62% in the last trading
session to close at $13.83.
The purchase offer from Kindred worth $533 million was to be paid
equally in cash and shares. After careful evaluation of the
successive, non-binding proposals from Kindred on Apr 14 and May 5,
2014, Gentiva considered the deal as undervalued and to safeguard
its shareholders' worth, rejected it. Subsequently, Kindred stated
that if Gentiva would prefer, it was willing to assume the bid-upon
company's debt, taking the total purchase consideration to $1.6
billion in an all-cash deal.
However, Gentiva seemed to be confident with its One Gentiva
initiative and thereby refrained from accepting the proposal. The
company's board of directors commented that it was capable of
generating significant value for its shareholders through One
Gentiva and other strategic initiatives. One Gentiva is the
corporate restructuring initiative taken by the company at the end
of the third quarter of 2013 to bring its home health, hospice and
community care businesses under a common regional management
structure so as to better align its operations.
Notably, following this news, Moody's Investors Service, the credit
rating wing of
) reiterated all its ratings on Gentiva with a negative outlook.
These ratings include the Corporate Family Rating (CFR) of "B3",
Probability of Default Rating (PDR) of "B3-PD" and the Speculative
grade Liquidity Rating of "SGL-3". Moody's believes that while it
is true that the acquisition would bring benefits like greater
scale, favorable payor mix and enhance Gentiva's business profile,
the uncertainties related to the deal would dwarf the positives.
However, as per other media sources, some consider that the
integration of Gentiva and Kindred could have been beneficial since
it would have created an entity capable of catering to 127,000
patients on a per day basis in 47 states and generate annual
revenues of approximately $7.2 billion. However, we cannot
altogether discard the fact that with the takeover pressure at its
doorstep, Gentiva might even become aggressive in enhancing its
financial structure and policies, so as to enhance its
shareholders' return and retain their confidence in the stock.
Gentiva carries a Zacks Rank #3 (Hold). However, investors might
consider a better-ranked healthcare stock like
), which has a Zacks Rank #2 (Buy).
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GENTIVA HEALTH (GTIV): Free Stock Analysis
KINDRED HLTHCR (KND): Free Stock Analysis
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