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Recently, Gentiva Health Services Inc. ( GTIV - Analyst Report ) announced that it has purchased the home health and hospice operations of Washington-based Family Home Care Corporation. The financial terms of the deal were not divulged.
While the transaction is not expected to have a material impact on Gentiva’s earnings, it will substantially expand the company’s foothold in the eastern Washington and northern Idaho markets. Family Home Care is one of the market leaders in home health and hospice services in these two states. Thus, the takeover will significantly boost Gentiva’s market share and strengthen its position as the largest provider of home health and hospice services in the U.S. based on revenues.
Gentiva will fund the acquisition with its available cash. This is expected to reduce the company’s cash balance significantly as it has been using its cash reserve to finance other acquisitions as well. Nevertheless, considering the fact that Gentiva exited the second quarter of 2012 with cash and cash equivalents of approximately $155.3 million, it can be assumed that it has ample cash balance to support the acquisitions.
Gentiva has been on an acquisition spree over the last few years. The company undertakes strategic acquisitions to expand its scope of operations and geographic coverage.
During July 2012, the company announced the acquisition of Advocate Hospice, a leading provider of end of life care. The acquisition of this Indiana-based company was also being funded from Gentiva’s cash reserves.
The transaction is not expected to have a material impact on Gentiva’s 2012 earnings. However, the acquisition of Advocate Hospice is expected to spread out its coverage in central and southern Indiana and leverage its existing hospice and home health facilities in the state.
Gentiva, which competes with Amedisys Inc. ( AMED - Snapshot Report ) , carries a Zacks #2 Rank, which translates into a short-term Buy rating. We maintain a long-term ‘Outperform’ recommendation on the stock.
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