Recently, a leading health and hospice provider,
Gentiva Health Services Inc.
) entered into a merger agreement with a complementary company
Harden Healthcare Holdings Inc. pursuant to which it will acquire
the latter for approximately $409 million. The deal is expected
to culminate in the fourth quarter of 2013 and is pending
customary closing conditions.
ADDUS HOMECARE (ADUS): Free Stock Analysis
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GENTIVA HEALTH (GTIV): Free Stock Analysis
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Of the purchase consideration, $355 million will be paid in cash
and the remaining $53.8 million in Gentiva common stock. The cash
transaction will be funded by available cash and a new credit
facility. Additionally Gentiva expects to issue a new $855
million term loan facility to finance the remainder of the
transaction and also to refinance the company's existing term
On closing, Gentiva will acquire the home, health, hospice and
community care business of Harden while the latter's long-term
care business will be retained by its existing shareholders.
Gentiva will become a preferred provider for the 49 skilled
nursing and assisted living facilities of Harden in Texas.
Additionally, Harden employees will be joining Gentiva. The
merger of the two companies is expected to create an entity with
home health contributing 49% of total revenues, hospice
contributing 41% and community care 10%.
The acquisition is expected to shore up the long-term growth of
Gentiva. Within one year of closing the deal is expected to
bolster Gentiva's adjusted income per share. Adjusted EBITDA is
expected to escalate to a range of $210 million to $220 million,
excluding the impact of equity based compensation expense. Also,
on culmination of the event at the stipulated time, 2014 revenues
will likely go up to a range of $2.1 billion to $2.2
billion. It is also expected to enhance the Medicare
exposure of Gentiva.
The healthcare industry provides ample growth opportunities at
present owing to the increasing healthcare needs of the aging
population and the existing rate pressures. Harden being a
leading post-acute care provider is expected to help Gentiva to
prosper in this field and position itself as a leader in this
regard. Also it is expected to broaden Gentiva's portfolio by
allowing it to offer its services to the dual eligibles, one of
the frailest populations of the U.S. and also a priority for the
Acquiring a complementary company is always beneficial as it
endows the acquirer with the opportunity to curb competition to
some extent as well as gain on the acquired company's resources.
Harden operates in 13 states and boasts a considerable customer
base. Thus we expect the strategic acquisition to help Gentiva
meet this objective apart from enhancing the company financials.
Gentiva currently carries a Zacks Rank #3 (Hold). Among other
health service providers,
) carry a Zacks Rank #2 (Buy) while
Addus HomeCare Corporation
) carries a favorable Zacks Rank #1 (Strong Buy).