What Sparked Gentiva Health Services, Inc. Stock's Surprising Surge

Gentiva shares soar after igniting a supposed bidding war for the company. Find out what this means for Gentiva's shareholders.

Sean Williams
Sean Williams
Jul 18, 2014 at 2:09PM
Health Care

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 (UNKNOWN:GTIV.DL), a provider of home health and hospice care within the United States, soared by as much as 14% earlier this morning after confirming that it had received another buyout offer from an undisclosed suitor.

So what: According to Gentiva, the buyer, which it's refused to name but described as "a recognized owner, operator, and investor in the sector", is willing to purchase Gentiva for $635.5 million, or $17.25 per share. This would be superior to Kindred Healthcare's (NYSE:KND) recently increased offer which currently stands at $16 per share and has been previously upped twice already. Gentiva's board of directors noted that it would consider the new proposal and advised shareholders against tendering their shares in favor of Kindred's $16 per share offer.

Now what: I'd personally like to know what company is crazy enough to bid Gentiva even higher. I do understand that Gentiva would help a larger suitor expand its geographic reach and could potentially help position a buyer for success over the next two to three decades as baby boomers begin to retire. However, Gentiva is also sporting a not so takeover friendly $1.1 billion in net debt and is likely going to be pinched by declining Medicare and Medicaid reimbursements as the Affordable Care Act pushes health-based businesses slowly away from relying on government funds. In other words, Gentiva's growth outlook isn't all that great and its debt only compounds those concerns, so the fight to buy it makes little sense to me. With shares once again trading above the stated offer price I'd suggest keeping your distance as I just don't see how any more blood can be squeezed out of this turnip.