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8-K - FORM 8-K - REHABCARE GROUP INC | c62848e8vk.htm |
EX-2.1 - EX-2.1 - REHABCARE GROUP INC | c62848exv2w1.htm |
EX-10.1 - EX-10.1 - REHABCARE GROUP INC | c62848exv10w1.htm |
Exhibit 99.1
Contact:
|
Richard A. Lechleiter | Contact: | Jay W. Shreiner | |||
Executive Vice President and | Executive Vice President and | |||||
Chief Financial Officer | Chief Financial Officer | |||||
(502) 596-7734 | (314) 659-2189 |
KINDRED HEALTHCARE TO ACQUIRE REHABCARE GROUP
Merger Would Create the Premier Provider of Post-Acute Healthcare Services in the United States
with over $6 Billion in Annual Revenues and Operations in 46 States
with over $6 Billion in Annual Revenues and Operations in 46 States
Transaction Expected to be Highly Accretive to Kindred Earnings and Create Significant Value
to Stockholders of Both Companies
to Stockholders of Both Companies
LOUISVILLE, Ky. and ST. LOUIS, Mo. (February 8, 2011) Kindred Healthcare, Inc. (Kindred)
(NYSE:KND) and RehabCare Group, Inc. (RehabCare) (NYSE:RHB) today jointly announced the signing
of a definitive merger agreement under which Kindred will acquire RehabCare.
Under the terms of the merger agreement, each stockholder of RehabCare common stock will
receive $26 per share in cash and 0.471 of a share of Kindred common stock. Based upon the average
value of Kindred common stock, as defined, during the ten trading days preceding the signing of the
merger agreement, each RehabCare stockholder will receive consideration with a current value of
approximately $35 per share. Kindred expects to issue approximately 12 million shares in
connection with the pending transaction. The aggregate value of the pending transaction
approximates $1.3 billion, including approximately $400 million of existing indebtedness.
This transaction will create the largest post-acute healthcare services company in the United
States with over $6 billion in annual revenues and operations in 46 states. The combined company
will operate 118 long-term acute care (LTAC) hospitals with 8,492 licensed beds, 226 nursing and
rehabilitation centers with 27,442 licensed beds, 121 inpatient rehabilitation (IRF) hospitals
(primarily hospital-based units) and 1,808 hospital, nursing center and assisted living
rehabilitation therapy services contracts across the country.
The merger agreement was unanimously approved by the Board of Directors of both Kindred and
RehabCare. Under the terms of the merger agreement, two members of the RehabCare Board of
Directors will join the Kindred Board following consummation of the transaction.
Kindred believes the transaction will be highly accretive to earnings and operating cash
flows, exclusive of one-time items related primarily to the pending merger, immediately upon
closing. In connection with the pending transaction, Kindred expects the combined company to
achieve operating synergies of approximately $40 million within a period of two years following
consummation of the acquisition, with $25 million expected in the first year after closing.
- MORE -
680 South Fourth Street Louisville, Kentucky 40202
502.596.7300 www.kindredhealthcare.com
502.596.7300 www.kindredhealthcare.com
Kindred Healthcare To Acquire RehabCare Group
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February 8, 2011
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February 8, 2011
Kindred has obtained a financing commitment from JPMorgan Chase Bank, N.A., Morgan Stanley
Senior Funding, Inc. and Citigroup Global Markets Inc. in connection with the pending transaction.
Subject to certain conditions as well as market conditions, the Company expects to have in place
approximately $1.9 billion of long-term financing, of which approximately $1.6 billion is expected
to be outstanding at the time of consummation of the pending transaction.
The RehabCare acquisition is subject to certain conditions, including approvals by the
stockholders of both companies, consummation of financing in accordance with the commitment
letters, clearance of the notification to the Federal Trade Commission under the provisions of the
Hart-Scott-Rodino Act of 1976, as amended, and the receipt of certain licensure and regulatory
approvals. It is expected that the pending transaction will be completed on or about June 30,
2011.
Paul J. Diaz, President and Chief Executive Officer of Kindred, commented, We are excited to
announce the RehabCare acquisition and we believe that the combination will be highly accretive for
Kindred stockholders, provide significant long-term strategic benefits to the stockholders of both
companies and enhance our future growth prospects. The expansion of our size and scale and the
opportunities to integrate RehabCares LTAC and IRF hospitals and rehabilitation therapy contract
business with our operations will create a stronger company both nationally and locally and create
value for all of our constituents in the communities we serve. We are particularly excited about
the opportunity to add RehabCares services in our cluster markets and inpatient rehabilitation
services to our service offerings. Together with our growing home care and hospice businesses, the
merger offers our patients an expanded continuum of services and the opportunity for us to
Continue the Care for our patients and residents through an entire episode of treatment and
recovery.
Mr. Diaz also commented, I know that all my colleagues at Kindred join me in
welcoming the RehabCare team as we jointly pursue the closing of this transaction and the building
together of a great new company that is committed to ensuring that our patients and residents
continue to receive the best care on their journey to recovery.
John H. Short, Ph.D., President and Chief Executive Officer of RehabCare, noted,
Our combination with Kindred delivers significant value to our stockholders and provides an
opportunity to share in the future growth of the combined company. We share the same commitment to
delivering leading-edge post-acute care that improves lives, and we expect our patients, healthcare
partners and professionals to benefit from the blending of our organizations.
Morgan Stanley is acting as financial advisor to Kindred, and Cleary Gottlieb Steen
& Hamilton LLP is acting as its legal advisor.
CitiGroup, Inc. is acting as financial advisor to RehabCare, Armstrong Teasdale, LLP is acting
as its legal advisor and Bryan Cave LLP is acting as legal advisor to its Board of Directors.
In connection with the pending transaction, Kindred has suspended its fiscal 2011
earnings guidance.
Pro Forma Financial Information
In connection with todays announcement of the RehabCare acquisition, Kindred
provided certain pro forma financial projections so that investors could more easily assess and
value the combined company.
The pro forma financial projections included in this press release assume that the
pending transaction was consummated on January 1, 2011 and include the projected results of the
combined company for the year ended December 31, 2011. Non-recurring costs and expenses associated
with the pending transaction have been excluded from the pro forma financial projections. The pro
forma financial projections assume that Kindred will realize approximately $25 million of operating
synergies in the first year following consummation of the transaction.
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Kindred Healthcare To Acquire RehabCare Group
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Based upon the pro forma financial projections, revenues for the combined company should
approximate $6.2 billion for the year ended December 31, 2011. Operating income, or earnings
before interest, income taxes, depreciation, amortization and rent, is expected to range from $892
million to $909 million. Rent expense is expected to approximate $422 million, while depreciation,
amortization and net interest expense are expected to approximate $303 million. Income from
continuing operations for the year could approximate $101 million to
$111 million or $1.95 to $2.15 per diluted share (based upon diluted shares of 51.2 million).
Mr. Diaz commented, The RehabCare acquisition offers a unique opportunity for significant
growth and earnings accretion for Kindred stockholders without excessive leverage. We expect
that the adjusted debt of the combined company, using a factor of six times rents, should
approximate 4.5 at the end of 2011. This compares to Kindreds stand-alone adjusted leverage of
4.4 at December 31, 2010. In addition, the combined companys ability to generate considerable
operating cash flows will allow for significant pay-downs of debt over the next few years.
Conference Call
A joint conference call to discuss the pending transaction will be held at 8:30 a.m. EST on
Tuesday February 8, 2011. The conference call can be accessed by dialing (913) 312-1305.
Investors can access a live webcast of the conference call through a link on Kindreds website at
www.kindredhealthcare.com.
A telephone replay of the conference call will be available at approximately 11:30 a.m. on
February 8 by dialing (719) 457-0820, access code: 7191328. The replay will be available through
February 16.
Forward-Looking Statements
This press release includes forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. All statements
regarding Kindreds and RehabCares expected future financial position, results of operations, cash
flows, financing plans, business strategy, budgets, capital expenditures, competitive positions,
growth opportunities, plans and objectives of management and statements containing the words such
as anticipate, approximate, believe, plan, estimate, expect, project, could,
should, will, intend, may and other similar expressions, are forward-looking statements.
Such forward-looking statements are inherently uncertain. In particular, the pro forma
financial projections included in this press release reflect Kindred managements assumptions and
estimates as of the date hereof. While Kindred management believes these assumptions and estimates
to be reasonable in light of the facts and circumstances known as of the date hereof, the
projections are necessarily speculative in nature. Many of these assumptions and estimates are
driven by factors beyond the control of Kindred or RehabCare, and it can be expected that one or
more of them will not materialize as expected or will vary significantly from actual results. No
independent accountants have provided any assurance with respect to these projections. Moreover,
Kindred does not undertake any obligation to update projections and does not intend to do so.
Accordingly, you should not place undue reliance on these projections or any of the other
forward-looking statements in this press release, which are likewise subject to numerous
uncertainties, and you should consider all of such information in light of the various risks
identified in this press release and in the reports filed by Kindred and RehabCare with the
Securities and Exchange Commission (the SEC), as well as the other information that Kindred and
RehabCare provide with respect to the pending acquisition.
The following factors, among others, could cause actual results to differ from those set forth
in the forward-looking statements: (a) the receipt of all required licensure and regulatory
approvals and the satisfaction of the closing conditions to the acquisition of RehabCare by
Kindred, including approval of the pending transaction by the shareholders of the respective
companies, and Kindreds ability to complete the required financing as contemplated by the
financing commitment; (b) Kindreds ability to integrate the operations of the acquired hospitals
and rehabilitation services operations and realize the anticipated revenues, economies of scale,
cost synergies and
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Kindred Healthcare To Acquire RehabCare Group
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productivity gains in connection with the RehabCare acquisition and any other acquisitions
that may be undertaken during 2011, as and when planned, including the potential for unanticipated
issues, expenses and liabilities associated with those acquisitions and the risk that RehabCare
fails to meet its expected financial and operating targets; (c) the potential for diversion of
management time and resources in seeking to complete the RehabCare acquisition and integrate its
operations; (d) the potential failure to retain key employees of RehabCare; (e) the impact of
Kindreds significantly increased levels of indebtedness as a result of the RehabCare acquisition
on Kindreds funding costs, operating flexibility and ability to fund ongoing operations with
additional borrowings, particularly in light of ongoing volatility in the credit and capital
markets; (f) the potential for dilution to Kindred stockholders as a result of the RehabCare
acquisition; and (g) the ability of the Company to operate pursuant to the terms of its debt
obligations, including Kindreds obligations under financings undertaken to complete the RehabCare
acquisition, and the ability of Kindred to operate pursuant to its master lease agreements with
Ventas, Inc. (NYSE:VTR). Additional factors that may affect future results are contained in
Kindreds and RehabCares filings with the SEC, which are available at the SECs web site at
www.sec.gov. Many of these factors are beyond the control of Kindred or RehabCare. Kindred and
RehabCare disclaim any obligation to update and revise statements contained in these materials
based on new information or otherwise.
As noted above, this press release includes a financial measure referred to as operating
income. Kindred uses operating income as a meaningful measure of operational performance in
addition to other measures. Kindred uses operating income to assess the relative performance of
its operating divisions as well as the employees that operate these businesses. In addition,
Kindred believes this measurement is important because securities analysts and investors use this
measurement to compare its performance to other companies in the healthcare industry. Kindred
believes that income from continuing operations is the most comparable GAAP measure. Readers of
Kindreds financial information should consider income from continuing operations as an important
measure of Kindreds financial performance because it provides the most complete measure of its
performance. Operating income should be considered in addition to, not as a substitute for, or
superior to, financial measures based upon GAAP as an indicator of operating performance. A
reconciliation of the estimated operating income to income from continuing operations provided in
the pro forma financial projections is included in this press release.
Additional Information about this Transaction
In connection with the pending transaction with RehabCare, Kindred will file with the SEC a
Registration Statement on Form S-4 that will include a joint proxy statement of Kindred and
RehabCare that also constitutes a prospectus of Kindred. Kindred and RehabCare will mail the
definitive proxy statement/prospectus to their respective stockholders. WE URGE INVESTORS AND
SECURITY HOLDERS TO READ THE JOINT PROXY STATEMENT/PROSPECTUS REGARDING THE PENDING TRANSACTION
WHEN IT BECOMES AVAILABLE BECAUSE IT WILL CONTAIN IMPORTANT INFORMATION. You may obtain a free
copy of the joint proxy statement/prospectus (when available) and other related documents filed by
Kindred and RehabCare with the SEC at the SECs website at www.sec.gov. The joint proxy
statement/prospectus (when available) and the other documents filed by Kindred and RehabCare with
the SEC may also be obtained for free by accessing Kindreds website at www.kindredhealthcare.com
and clicking on the Investors link then clicking on the link for SEC Filings or by accessing
RehabCares website at www.rehabcare.com and clicking on the Investor Information link and then
clicking on the link for SEC Filings.
Participants in this Transaction
Kindred, RehabCare and their respective directors, executive officers and certain other
members of management and employees may be soliciting proxies from their respective stockholders in
favor of the pending transaction. Information regarding the persons who may, under the rules of
the SEC, be considered participants in the solicitation of stockholders in connection with the
pending transaction will be set forth in the joint proxy statement/prospectus when it is filed with
the SEC. You can find information about Kindreds executive officers and directors in Kindreds
definitive proxy statement filed with the SEC on April 1, 2010. You can find information about
RehabCares executive officers and directors in its definitive proxy statement filed with the SEC
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Kindred Healthcare To Acquire RehabCare Group
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on March 23, 2010. You can obtain free copies of these documents from Kindred or RehabCare,
respectively, using the contact information above.
About Kindred Healthcare
Kindred Healthcare, Inc., a top-200 private employer in the United States, is a FORTUNE 500
healthcare services company based in Louisville, Kentucky with annual revenues of over $4.3 billion
and approximately 56,800 employees in 40 states. At December 31, 2010, Kindred through its
subsidiaries provided healthcare
services in 696 locations, including 89 long-term acute care hospitals, 226 nursing and
rehabilitation centers and a contract rehabilitation services business, Peoplefirst rehabilitation
services, which served 381 non-affiliated
facilities. Ranked as one of Fortune magazines Most Admired Healthcare Companies in 2009 and 2010,
Kindreds mission is to promote healing, provide hope, preserve dignity and produce value for each
patient, resident, family member, customer, employee and shareholder we serve. For more
information, go to www.kindredhealthcare.com.
About RehabCare Group
Established in 1982 and headquartered in St. Louis, MO, RehabCare Group, Inc.
(www.rehabcare.com) is a leading provider of post-acute care, owning and operating 34 long-term
acute care and rehabilitation hospitals and providing program management services in partnership
with over 1,250 hospitals and skilled nursing facilities in 42 states and Puerto Rico. RehabCare
is included in the Russell 2000 and Standard and Poors Small Cap 600 Indices.
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Kindred Healthcare To Acquire RehabCare Group
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KINDRED HEALTHCARE, INC.
Reconciliation of Pro Forma Financial Projections Continuing Operations (a)
For the Year Ending December 31, 2011
(Unaudited)
(In millions, except per share amounts)
Reconciliation of Pro Forma Financial Projections Continuing Operations (a)
For the Year Ending December 31, 2011
(Unaudited)
(In millions, except per share amounts)
As of February 8, 2011 | ||||||||
Low | High | |||||||
Operating income |
$ | 892 | $ | 909 | ||||
Rent |
422 | 422 | ||||||
Depreciation and amortization |
185 | 185 | ||||||
Interest, net |
118 | 118 | ||||||
Income from continuing operations before income taxes |
167 | 184 | ||||||
Provision for income taxes |
66 | 73 | ||||||
Income from continuing operations |
101 | 111 | ||||||
Allocation to participating unvested restricted stockholders |
1 | 1 | ||||||
Available to common stockholders |
$ | 100 | $ | 110 | ||||
Earnings per diluted share |
$ | 1.95 | $ | 2.15 | ||||
Shares used in computing earnings per diluted share |
51.2 | 51.2 |
(a) | The pro forma financial projections included in this press release assume that the pending transaction was consummated on January 1, 2011 and include the projected results of the combined company for the year ended December 31, 2011. Non-recurring costs and expenses associated with the pending transaction have been excluded from the pro forma financial projections. The pro forma financial projections assume that Kindred will realize approximately $25 million of operating synergies in the first year following consummation of the transaction. The pro forma financial projections reflect Kindred managements assumptions and estimates as of the date hereof. While Kindred management believes these assumptions and estimates to be reasonable in light of the facts and circumstances known as of the date hereof, the projections are necessarily speculative in nature. Many of these assumptions and estimates are driven by factors beyond the control of Kindred or RehabCare, and it can be expected that one or more of them will not materialize as expected or will vary significantly from actual results. No independent accountants have provided any assurance with respect to these projections. Kindred does not undertake any obligation to update projections and does not intend to do so. See Forward-Looking Statements in the accompanying press release. |