Gentiva Prices Senior Notes

Gentiva Health Services Inc. (GTIV - Analyst Report) priced its private offering of an aggregate principal amount of $325 million of its 11.5% senior notes due 2018 at an issue price of 100%, reflecting a $20 million increase from the proposed offering of $305 million announced on August 4. Gentiva anticipates closing of the notes offering subject to customary conditions on August 17.

Along with the available cash at Gentiva and about $780 million in proceeds from the new credit facility, Gentiva plans to utilize the net proceeds from the notes offering to fund its previously announced acquisition of Odyssey HealthCare Inc. (ODSY).

According to Rule 144A and Regulation S under the Securities Act of 1933, as amended, only qualified institutional buyers and certain non-U.S. persons are entitled to invest in these notes, as the notes are not registered under the Securities Act or any state securities laws for any issue or sale in the U.S., without seeking permission.

The guarantee of the notes is largely undertaken by all of Gentiva's domestic wholly owned subsidiaries, including Odyssey, which is expected to complete the proposed merger on August 16, 2010.

Our Take

The health care industry is consolidating through a flood of mergers and acquisitions (M&A) of home health and hospice providers. Apart from the acquisition of Odyssey in May, Gentiva also acquired the assets of United Home Care Group to expand its presence in Louisiana.

We believe that Gentiva will remain active in the M&A space, particularly after the reimbursement rate cuts that are being introduced under healthcare reforms.

Gentiva’s diversified product portfolio is impressive and its history of generating significant leverage on acquisitions and modestly strong fundamentals inspire our optimism about the stock.

The quantitative Zacks #3 Rank for Gentiva denotes a short-term 'Hold' rating, indicating no clear directional pressure on the shares over the near term.

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