Kindred launches hostile takeover bid for home health company Gentiva, deal valued at $1.6 billion

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Kindred Healthcare has launched a hostile takeover to acquire home health company Gentiva, announcing a $533 million bid Thursday. The total deal would be valued at $1.6 billion, including assumed debt.

Gentiva's board of directors rejected an unsolicited offer that Kindred tendered earlier this month. The board “continues to believe that our long-term strategy as a stand-alone company will generate substantially more value to our shareholders,” Gentiva leadership wrote in a May 13 letter to Kindred.

The board rejected the latest proposal in a statement issued Thursday, saying Kindred's offer undervalues the company, which has “attractive prospects for growth and value creation.”

However, the Gentiva leadership now finds itself under pressure, with some analysts saying that Kindred's offer appears to be in Gentiva's best interests. CRT Research analyst Sheryl Skolnick noted that Gentiva's stock has been below Kindred's $14-per-share offer price since 2011.

"We view (the rejection) as a meaningful error on (Gentiva) management's part, as our long experience tells us that it would take management a very long time to create that kind of increase in value," Sheryl Skolnick wrote in a note quoted by Reuters.

Kindred CEO Paul Diaz also focused on Gentiva's share prices in commenting on the decision to take the offer public.

“We have elected to make our compelling proposal known to Gentiva's shareholders — a proposal that represents a 64% premium to yesterday's closing price and a 40% premium to Wall Street analysts' one-year median price target of $10.00 per share,” Diaz said in a prepared statement. 

More than 20% of Gentiva shareholders already are also Kindred shareholders, Diaz added.

The deal also makes sense because home health and post-acute payments both are coming in for greater scrutiny and bundled payments already are gaining steam, making consolidation a logical step, Height Analytics' Justin Simon told MarketWatch.

A combined Kindred-Gentiva operation would serve about 127,000 patients each day in 47 states, according to Kindred. The company's offer took the form of half-cash, half-stock, but it said it also is willing to do an all-cash transaction.

Kindred, one of the nation's largest long-term and post-acute care providers, has moved aggressively to downsize its skilled nursing services while expanding therapy and home health.

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