Genesis HealthCare signs definitive agreement to merge with Skilled Healthcare Group

Genesis HealthCare, one of the nation's largest providers of post-acute care services, today announced that it has signed a definitive agreement to combine with Skilled Healthcare Group, Inc., based in Foothill Ranch, California. The combined company will be able to expand its core business lines and enhance its collective ability to provide the highest quality patient care while meeting the current challenges facing the healthcare industry. The combined company will provide scale and resources to continue investment for the future.

Under the terms of the agreement, Skilled Healthcare shareholders will collectively own 25.75% of the vote and value of the fully-diluted equity of the combined company. Genesis HealthCare shareholders will own the other 74.25%. The closing of the transaction is subject to regulatory approvals, expiration of the waiting period under the Hart-Scott-Rodino (HSR) Antitrust Improvements Act of 1976, as well as other conditions. The closing is expected to occur in early 2015.

After completion of the transaction, the combined company will operate under the Genesis HealthCare name and will be traded on the NYSE. Headquarters for the combined company will remain in Kennett Square, PA, and George V. Hager, Jr. will be the CEO of the newly-combined company. The Board of Directors will initially consist of representative Directors from both companies as well as independent Directors. This will create a governance structure that will facilitate and help to build strategic value.

The combined company would have trailing 12 months revenues (as of June 30, 2014) of more than $5.5 billion, with more than 500 facilities in 34 states and approximately 95,000 employees. Conservatively, $25 million in synergies have been identified in the transaction, with additional upside potential. The Combined Company estimated Pro-forma Funded Net-Debt is expected to be approximately $925 million.

For the six months ending June 30, 2014, Genesis HealthCare had Non-GAAP revenues of approximately $2.4 billion, Non-GAAP EBITDA of $86 million, Non-GAAP EBITDAR of $310 million, and cash based rent of $224 million.

"The constantly changing healthcare environment presents challenges for today's post-acute healthcare industry providers," states Genesis Chief Executive Officer George V. Hager, Jr. "The combination of our portfolios enables Genesis to enter the public domain, expand opportunities and enter new markets with our sub-acute and long-term care facilities and our rehabilitation services business."

"The combination of Genesis and Skilled Healthcare will improve overall financial positions and liquidity while creating opportunities of scale as one of the largest providers in the sector," note Steve Fishman and Arnold Whitman, co-chairmen of the board of Genesis HealthCare. "The combined company will be well positioned to innovatively partner with payors and providers to meet the ever-changing needs of seniors across the nation."

BofA Merrill Lynch and Barclays are acting as Genesis' financial advisors, and Skadden, Arps, Slate, Meagher & Flom LLP and Arnall Golden Gregory LLP are acting as legal advisors.

Conference Call
A combined conference call and webcast will be held tomorrow, August 19, at 6:00 a.m. Pacific Time (9:00 a.m. Eastern Time) to discuss the transaction.

SOURCE Genesis HealthCare