While we don't believe in paying too much attention to buyout rumors and speculating on potential takeover targets, Fools should definitely try to keep up with M&A news that is officially announced -- just in case they're material to our investing thesis.
What: Home health care provider Gentiva Health Services (NASDAQ: GTIV) announced plans to acquire the home health, hospice, and community care businesses of Harden Healthcare Holdings for about $408.8 million in cash and stock.
So what: Gentiva's results have been heavily pressured by budget cuts and Medicare changes over the past several months, but the Harden deal should help reduce its Medicare exposure, as well as expand its services for the dual-eligible population. In other words, Gentiva's revenue will be much more diversified after the acquisition -- 49% home health revenue, 41% hospice revenue, 10% community care revenue. Judging by the stock's 10% pop today, Mr. Market is thrilled with the price management is paying.
Now what: Gentiva expects the acquisition to close in the fourth quarter and be accretive to its adjusted earnings per share within 12 months after that. "I consider the Harden transaction a milestone in the continued Gentiva growth story," said Gentiva Executive Chairman Rod Windley. "The increasing health care needs of an aging population and ongoing rate pressures will fuel industry consolidation and Gentiva is positioned to be a leader in this effort." More importantly, with the stock still off about 10% from its 52-week highs and trading at a forward P/E of 12, there might be some upside left to profit from those tailwinds.
