UPDATE 2-Kindred Healthcare raises offer for Gentiva

Mon Jun 16, 2014 8:00pm EDT

(Adds comment from Gentiva, updates shares)

June 16 (Reuters) - U.S. hospital operator Kindred Healthcare Inc on Monday raised its offer for home healthcare services provider Gentiva Health Services Inc to $573 million, a little more than three weeks after Gentiva said it adopted a poison pill to counter the hostile bid.

Kindred increased its bid by 50 cents per share to $14.50 per share in cash, a 3.65 percent premium to Gentiva's closing price on Monday.

The offer represents a premium of 70 percent to Gentiva's closing price on May 13, the day before Kindred made public its offer to acquire Gentiva, Kindred said.

With the assumption of Gentiva's debt, the deal would be valued at about $1.7 billion, Kindred said.

Kindred said on May 15 that it made its $14-per-share offer public because Gentiva was unwilling to discuss a deal to create a company with adjusted annual revenue of about $7.2 billion that provides a full spectrum of services to an aging U.S. population.

Gentiva rejected the bid, saying it could generate more value as a standalone company and, later that month, adopted a poison pill with a trigger of 15 percent.

Kindred said on Monday if it could not buy all of Gentiva's shares, it would look to acquire 14.9 percent of them, making it the largest shareholder in the company.

"Although Gentiva's board has put in place a poison pill, we are moving forward with an all-cash tender offer to demonstrate our commitment to completing this transaction and to provide Gentiva shareholders with an opportunity to make their collective voice heard," Kindred Chief Executive Paul Diaz said.

"Poison pills," also called shareholder rights plans, are designed to stop hostile takeover attempts by triggering the issuance of new shares that dilute the holdings of investors who exceed a set threshold.

Kindred said it would finance the deal with a mix of debt and equity.

The deal would add about $60 million to $80 million in financial synergies to earnings and cash flow annually, Kindred said.

In a separate statement Gentiva asked its shareholders to take no action with respect to Kindred's offer until its board made its recommendation.

Gentiva said its board will review all aspects of the offer and make a recommendation to its shareholders, which will be outlined in a regulatory filing with the Securities and Exchange Commission within 10 business days of commencement of the offer.

Citigroup acted as financial adviser to Kindred.

Barclays and Edge Healthcare Partners served as financial advisers to Gentiva.

Shares of Kindred were down about 1 percent at $25.48 in extended trading, while those of Gentiva were up 4 percent at $14.54. (Reporting by Ankit Ajmera in Bangalore; Editing by Maju Samuel)

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