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 Kindred Merger Demonstrates Explosive Growth Potential for Profession

Kindred’s takeover of home health and hospice company Gentiva has some wondering whether the long term and post-acute care profession is in the midst of consolidation.
Kindred has already won regulatory approval of its $1.18 billion hostile takeover bid, after Gentiva’s board voted unanimously to sell off. When the merger completes early next year, Kindred will become the nation’s largest operator of long term, acute-care hospitals, inpatient rehabilitation facilities, as well as the U.S.’ largest rehabilitation, home health, and hospice providers, according to Kindred and Gentiva.

Overall, the combined company will be the nation’s fourth-largest health care company, with annual revenue of $7.1 billion, the companies said in a news release.

The deal did not come easily: Gentiva fought hard for months, and Kindred ultimately had to raise its offer by nearly 50 percent, according to published reports. Gentiva lawyers and officials worked hard “to implement a poison pill, fend off two tender offers, negotiate a third-party bid, and finally negotiate a successful merger agreement with Kindred for $19.50” per share, Greenberg, Traurig attorney Gary Snyder tells Provider.

Snyder and his colleagues helped negotiate for Gentiva in the deal.

In isolation, the deal—announced Thursday—would have been huge; but it comes on the heels of a series of mergers over the past year or so that have some wondering whether the long term and post-acute care profession still has a lot of growing to do.
In July, for instance, Brookdale Senior Living, the nation’s largest assisted living company, announced that it had closed its deal with Sunrise Senior Living, the nation’s fourth-largest assisted living company. Based on data given to Provider for its annual survey of the nation’s Top 40 Largest Assisted Living Companies, the two companies offered a combined capacity of nearly 50,000 people.
Two weeks after the Brookdale deal closed, Genesis HealthCare—already the nation’s largest long term and post-acute care provider (with 49,000 beds)—announced a $5.5 billion stock-swap takeover of the nation’s 14th-largest provider, Skilled Healthcare Group (with almost 9,000 beds).
Zack’s Investment Research Chief Equity Strategist John Block says that the mergers won’t be the last of their kind.
“The one sweet spot in this market, this year, has been the health care companies. They’re a defensive area—people aren’t worrying about global growth or competition,” he says. “Half of the labor force participation is declining because baby boomers are retiring. The one growth market in the United States that is consistent is this type of care.”
Generally, health care stock (as well as public utilities stock) rises in rough economic times because they have “regulated, steady demographics;” that is, a steady supply of customers, Block says.
Kindred was already one of the biggest providers in the country, according to Provider’s annual list of the Top 50 Largest Nursing Facility Companies. It came in at eight this year, with nearly 13,000 beds.
“There are two areas of the stock market that have large cash flows,” Block says. “One is infotech, and the other is health care. I would not expect anything but more mergers, because there is a lot of cash lying around.”
Bill Myers is Provider’s senior editor. Email him at wmyers@providermagazine.com. Follow him on Twitter, @ProviderMyers.
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