Kindred Healthcare, Inc. (“Kindred” or the “Company”) (NYSE:KND), the nation’s largest provider of integrated post-acute care and rehabilitation, today announced that it has signed a definitive merger agreement to acquire Centerre Healthcare Corporation (“Centerre”), a national company dedicated to operating Inpatient Rehabilitation Hospitals, for a purchase price of approximately $195 million in cash.
Centerre currently operates 11 Inpatient Rehabilitation Hospitals with 612 beds in partnership with some of the nation’s leading acute care hospital systems through joint ventures. Centerre has two additional hospitals with a total of 90 beds under construction and scheduled to open in 2015, and a pipeline of additional potential hospitals in various stages of development.
Centerre’s operations are expected to generate 2014 revenues of approximately $200 million and earnings before interest, income taxes, depreciation, amortization and rent (“EBITDAR”) of approximately $48 million (prior to deducting $14 million of minority interest expense for interests owned by Centerre’s hospital partners). All of Centerre’s hospitals are leased and are expected to have approximately $20 million of rent expense in 2014. Of the 11 hospitals that Centerre currently operates, three opened in 2014 and two opened in 2013, and thus the anticipated 2014 results do not include expected additional results from the full two year maturation of the recently opened hospitals. Kindred expects the acquisition of Centerre to be $0.04 to $0.06 accretive to earnings and operating cash flows in 2015, assuming Kindred’s expected pro forma share count following completion of its pending acquisition of Gentiva Health Services, Inc. (NASDAQ:GTIV) of approximately 85 million shares, exclusive of transaction and integration costs. Once fully integrated, and the new and existing Inpatient Rehabilitation Hospitals mature, Kindred expects the transaction to be approximately $0.10 to $0.12 accretive to earnings.
The Centerre acquisition is subject to several conditions to closing, including, among others, approval of the merger agreement by the requisite vote of Centerre’s stockholders, regulatory approvals, consents from certain joint venture partners and certain other customary conditions to closing, including the expiration of the waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. The Centerre transaction is expected to close in the first quarter of 2015.
Centerre’s Inpatient Rehabilitation Hospitals are geographically aligned with five targeted Kindred Integrated Care Markets. The addition of Centerre’s portfolio to Kindred’s five Inpatient Rehabilitation Hospitals, and its 102 hospital-based acute rehabilitation units (“ARUs”) (certified as Inpatient Rehabilitation Facilities) managed by Kindred’s RehabCare division, will make Kindred one of the largest operators of Inpatient Rehabilitation Hospitals in the nation.1
1 Based upon sites of service. Source: MedPar and RehabCare Databases.
With this acquisition, Kindred will establish a focused growth platform, and business line, to be known as Kindred Hospital Rehabilitation Services, which will combine the strengths of RehabCare, Kindred’s Rehabilitation Hospitals and Centerre. The business will operate in 36 states in 384 locations and will have pro forma revenues of approximately $578 million and EBITDAR of approximately $147 million (based on Kindred’s 2014 annualized revenues and Centerre’s 2014 estimated revenues) and continue to operate under Kindred’s RehabCare Division. Kindred Hospital Rehabilitation Services will be guided by a shared set of core competencies focused on providing the highest quality, clinical outcomes and patient satisfaction as well as improved care transitions to home for patients in need of intensive rehabilitation.
“Our acquisition of Centerre will expand our relationships with some of the nation’s premier hospital systems,” said Benjamin A. Breier, Kindred’s President and Chief Operating Officer. “This is a positive step in Kindred’s strategy to collaborate with healthcare networks, managed care providers, and other health entities in local markets so that we may best meet patient needs, reduce costs and improve clinical outcomes. Additionally, this builds on our reputation for quality patient care with the combined company delivering clinical and quality outcomes that outperform national benchmarks. We look forward to welcoming Centerre’s 1,600 dedicated employees to our team.”
“We at Centerre are proud of our ability to create rehabilitation hospitals with superior outcomes through our joint venture relationships,” said Patrick Foster, Centerre’s President and Chief Executive Officer. “We believe that Kindred’s expertise across the post-acute continuum will build upon this reputation and bring new opportunities to partner with hospitals and health systems.”
“The addition of the well-respected Centerre locations to our current rehabilitation hospital portfolio strengthens our position as one of the nation’s premier providers of inpatient rehabilitation,” said Paul J. Diaz, Kindred’s Chief Executive Officer. “This transaction builds upon our Continue the Care strategy and supports our Mission of making recovery and a return to home and wellness possible for thousands of patients across America.”