Kindred Healthcare, Inc. (the "Company") (NYSE: KND) today announced that its subsidiaries have signed a definitive agreement to acquire five long-term acute care ("LTAC") hospitals from Vista Healthcare, LLC ("Vista") for a purchase price of $180 million in cash.
“We are excited to have these new employees join our organization and believe they bring resources and expertise that will complement our existing operations and local teams. These transactions also will provide our new colleagues with additional opportunities for professional growth and development.”
Vista operates four freestanding hospitals and one hospital-in-hospital with a total of 250 beds all located in southern California. The assets being acquired currently generate annualized revenues of approximately $150 million and earnings before interest, income taxes, depreciation and amortization of approximately $27 million. The Company is not acquiring the working capital of Vista or assuming any of its liabilities. All of the Vista hospitals are leased. The Company expects to finance the transaction with proceeds from its revolving credit facility.
The Vista transaction is subject to several regulatory approvals and other conditions to closing, including the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvement Act of 1976, as amended. The Vista transaction is expected to close in the fourth quarter of 2010.
The Company also announced that its subsidiaries have signed a definitive agreement to acquire three recently constructed nursing and rehabilitation centers in the Dallas-Fort Worth market for a purchase price of $38 million in cash. The Company currently operates six hospitals and is developing a co-located hospital-based subacute unit in the Dallas-Fort Worth market. In addition, the Company announced that it intends to develop two of these three nursing centers into transitional care centers, focused on short-term rehabilitation and medically complex patients, and add a transitional care unit to the third nursing center. The Company expects to finance this transaction with proceeds from its revolving credit facility.
These three owned nursing and rehabilitation centers have a total of 405 beds and currently generate annualized revenues of approximately $24 million and earnings before interest, income taxes, depreciation and amortization of approximately $3 million. The Company is acquiring the real estate associated with these nursing and rehabilitation centers but is not acquiring working capital or assuming any liabilities. The transaction is subject to several regulatory approvals and other conditions to closing and is expected to close by the end of the third quarter of 2010.
Within the first year following the closing of these transactions, the Company expects to incur certain transition costs that are expected to range from $6 million to $8 million. Excluding these costs, the Company expects that these transactions will be slightly accretive to earnings in 2010 and $0.17 to $0.22 per diluted share accretive to earnings upon completion of the integration process. The Company's estimate of earnings accretion includes the expected negative impact of refinancing its current $500 million revolving credit facility, including both its existing indebtedness and the amounts used to finance these transactions. The Company expects to complete the refinancing in the fourth quarter of 2010.
Paul J. Diaz, President and Chief Executive Officer of the Company, commented that "We view the Vista transaction as a great opportunity to meet the growing demand for our services in southern California and expand our hospital operations. The Vista hospitals provide high quality services and care for patients with high acuity levels. The Vista hospitals also provide several clinical service offerings not currently available in our area hospitals providing us with an opportunity to expand our clinical services as well as attract more commercial and managed care business."
Ara Tavitian, M.D., President and Chief Executive Officer of Vista, said, "The dedication and efforts of our management team, including Marc C. Ferrell, J. Vartan Hovsepian and Marc A. Furstman, and our staff have enabled us to make Vista a high quality provider of healthcare. We are excited about joining our operations with Kindred and believe that our combined strengths will promote expanded services and clinical programs that will better serve our patients and their families. Kindred also offers our employees the ability to expand their opportunities with a proven and dynamic healthcare provider. We look forward to integrating our operations with Kindred and to the continued growth and development of our combined services."
Mr. Diaz further commented, "We are excited to have these new employees join our organization and believe they bring resources and expertise that will complement our existing operations and local teams. These transactions also will provide our new colleagues with additional opportunities for professional growth and development."
Mr. Diaz continued that, "We continue to seek opportunities to expand our continuum of post-acute care services in our key cluster markets to support the growing interest among public and private payors for integrated care. The Vista transaction adds five quality hospitals to our southern California cluster market. The nursing and rehabilitation center transaction offers us the opportunity to acquire three relatively new, owned facilities and develop them into transitional care centers to complement our existing hospital services in the Dallas-Fort Worth cluster market, where we currently operate six hospitals. This transaction also allows us to continue to add to our owned real property base. By expanding our continuum of post-acute care services and clinical expertise, these acquisitions will allow us to better serve the needs of patients, families, physicians and payors of healthcare in these markets. Finally, these transactions reflect our continued confidence in our strategic plan and the strength of our core operations to grow in a challenging healthcare environment."
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