Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Gentiva Health Services (NASDAQ: GTIV) rose by over 17% this morning after its long, drawn-out battle with Kindred Healthcare (KND) finally ended, with Kindred sealing a deal to buy the home health and hospice company for a reported $1.8 billion in cash and stock. Gentiva shareholders will get $14.50 per share and $5 in Kindred stock, per the press release.
Kindred has been attempting to buy Gentiva since May, but Gentiva repeatedly rejected previous offers as too low and detrimental to its shareholders. Today's agreement is significantly higher than Kindred's initial offers.
So what: Kindred said in the press release it would "immediately benefit from the deal by increasing earnings and operative cash flow." Most importantly, this deal will significantly increase Kindred's share of the post-acute and rehabilitation services markets, which are growing rapidly due to an aging U.S. population.
Now what: Synergies from deal should result in approximately $1 billion in savings . Kindred was already on track to generate double-digit earnings growth next year, but this deal should cause earnings to rise on the order of 20% to 30%. Kindred's top line alone will see a boost of more than $2 billion, with the combined company expected to generate sales of $7.1 billion next year. All told, Kindred looks like a compelling growth story to keep tabs on in the wake of its buyout of Gentiva.
