Back to top

Analyst Blog

This page is temporarily not available.  Please check later as it should be available shortly. If you have any questions, please email customer support at support@zacks.com or call 800-767-3771 ext.  9339.

Recently, a leading health and hospice provider, Gentiva Health Services Inc. (GTIV - Analyst Report) 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.

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 loans.

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 U.S. government.

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, Amsurg Corp. (AMSG - Analyst Report) and LCA-Vision Inc. (LCAV - Snapshot Report) carry a Zacks Rank #2 (Buy) while Addus HomeCare Corporation (ADUS - Snapshot Report) carries a favorable Zacks Rank #1 (Strong Buy).

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

Learn more

Start for as little as $4.50 per trade.

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
DIXIE GRP IN DXYN 15.84 +7.90%
BOFI HLDG IN BOFI 85.30 +4.97%
RAMBUS INC RMBS 12.31 +4.41%
VIPSHOP HOLD VIPS 148.73 +4.35%
NETFLIX INC NFLX 345.74 +4.32%