- Kindred Continues Expansion through Acquisitions
- September 1, 2010 | Author: Jason S. Greis
- Law Firm: McGuireWoods LLP - Chicago Office
Kindred Healthcare has moved to expand its market presence in key cluster markets in California and Texas by signing definitive agreements to purchase five LTACHs in southern California for $180 million and three Texas-based nursing and rehabilitation centers for $38 million in two separate all-cash deals for a total purchase price of $218 million. Both transactions require regulatory approvals and are expected to close later this year.
In California, Kindred plans to acquire five leased LTACHs from Rancho Cucamonga, California-based Vista HealthCare. Vista operates four freestanding hospitals and one hospital-in-hospital. The 250 total beds generate annualized revenues of $150 million and EBITDA-adjusted earnings of $27 million. The valuation for these LTACHs of 6.6x EBITDA is similar to the valuation for RehabCare’s acquisition of Triumph in November 2009.
In Texas, Kindred will acquire three nursing and rehabilitation centers in the Dallas-Fort Worth area from an unidentified company. With a total of 405 beds, the three centers generate annualized revenues of $24 million and EBITDA-adjusted earnings of $3 million. Kindred plans to convert two of the three new centers into short-term transitional care centers, as well as adding a transitional care unit to the third nursing center. Kindred already operates six LTACHs, and is developing a co-located hospital-based subacute unit, in Dallas-Fort Worth. Paul Diaz, Kindred’s President and CEO, said the purchases further the company’s strategy of offering a continuum of long-term care services, including nursing care, rehabilitation, transitional care and hospitals, in key markets.
Kindred anticipates incurring first-year transition costs of $6 million to $8 million for the two acquisitions. Excluding these costs, the company expects the acquisitions to be slightly accretive to earnings in 2010 and to add earnings of $0.17 to $0.22 per diluted share post-integration. That estimate factors in the expected added cost of refinancing Kindred’s debt, including the funds it will borrow to buy the new facilities.
As of December 31, 2009, Kindred operated 10 hospitals (823 licensed beds) in California and 11 hospitals (822 beds) in Texas. The company had 21 nursing facilities (2,437 beds) in California but none in Texas. Nationally, Kindred had 83 LTAC hospitals (6,580 beds) and 222 nursing facilities (27,523 beds).