UPDATE 2-Skilled Healthcare, Genesis HealthCare agree to combine
(Adds CEO's comment in paragraphs 7 and 8, context on the industry's consolidation in paragraphs 6 and 9)
By Susan Kelly
Aug 18 (Reuters) - Skilled Healthcare Group Inc and privately held Genesis HealthCare said on Monday they have agreed to combine in an all-stock transaction that will create one of the largest U.S. operators of long-term care facilities.
Under terms of the agreement, Skilled Healthcare shareholders will own 25.75 percent of the equity in the combined company, while Genesis shareholders will own the other 74.25 percent.
The combined company will operate under the Genesis HealthCare name and will trade on the New York Stock Exchange. Genesis Chief Executive Officer George Hager will lead the new company, which will be based at Genesis' offices in Kennett Square, Pennsylvania.
Genesis operates skilled nursing centers and senior living communities and supplies rehabilitation services to other healthcare providers.
Skilled Healthcare, based in Foothill Ranch, California, runs long-term care facilities and provides a range of services to patients after they leave the hospital.
Cuts in Medicare insurance reimbursement rates and efforts under President Barack Obama's health reform law to tie payments to improved patient outcomes are driving a wave of consolidation among hospitals and other healthcare providers.
Hager, in an interview, said the deal will reduce costs, improve purchasing power and leverage technology for the combined company.
"We are positioning the companies to react to a system that is changing and becoming more outcomes-based and pay-for-performance-based," the CEO said.
In the so-called post-acute sector that provides services to patients after they've been discharged from the hospital, home healthcare provider Gentiva Health Services Inc rejected an offer last month from Kindred Healthcare Inc to buy a stake in the company. Gentiva said it had received a new $634.2 million buyout offer from an unnamed party.
Genesis and Skilled Healthcare together will have annual revenue of more than $5.5 billion and more than 500 facilities in 34 states.
The deal, which has been approved by the boards of both companies, is expected to close in early 2015.
In another development, Toledo, Ohio-based Health Care REIT Inc said it expects to pursue a cashless exercise of an option to buy a 9.9 percent stake in Genesis that it obtained when it acquired real estate from the company in April 2011. (Reporting by Susan Kelly in Chicago; Editing by Steve Orlofsky and Jan Paschal)