(Corrects designation of Rod Windley in paragraph 6 to executive chairman from CEO)
* To buy Harden’s home health, hospice, community care businesses
* Deal to reduce Gentiva’s dependence on Medicare revenue
* Gentiva expects 2014 combined revenue of $2.1-$2.2 bln
Sept 19 (Reuters) - Gentiva Health Services Inc will buy the home health, hospice and community care businesses of privately held Harden Healthcare Services for about $409 million as it braces for continued cuts in reimbursements for its services.
Home healthcare provider Gentiva has been struggling with the budget cuts and changes in Medicare reimbursement rates brought on by President Barack Obama’s healthcare law.
The deal will help reduce Gentiva’s dependence on revenue from Medicare and expand its services to dual-eligibles, people who are covered by both Medicare and Medicaid.
Gentiva offered Harden $355 million in cash and about $54 million in its common stock.
Harden’s shareholders will retain the company’s long-term care business, Gentiva said.
“The increasing healthcare needs of an aging population and ongoing rate pressures will fuel industry consolidation and Gentiva is positioned to be a leader in this effort,” Gentiva Executive Chairman Rod Windley said in a statement.
The Obama administration on Tuesday extended wage laws to cover almost 2 million home health workers, who assist the elderly and disabled.
Gentiva said it expects combined revenue from the two companies to be between $2.1 billion and $2.2 billion in 2014.
It said the combined company’s revenue from Medicare would have been 72 percent of its total revenue in 2012. Medicare revenue comprised 86 percent of Gentiva’s total revenue last year.
Gentiva said it expects almost half of the combined company’s revenue to come from home health, 41 percent from hospice and 10 percent from community care.
The company said it expects the deal to add to adjusted earnings per share within 12 months of its close in the fourth quarter.
Gentiva said it would become a preferred provider for Harden’s skilled nursing and assisted living facilities in Texas.
The company will fund the cash portion of the deal through available cash and a new credit facility.
It expects to sign for a term loan facility of $855 million to finance the deal and refinance its existing term loans.
Barclays and BofA Merrill Lynch provided committed financing for the deal, Gentiva said.
Edge Healthcare Partners LLC served as financial adviser to Gentiva, while Barclays acted as financial adviser to Harden.
Greenberg Traurig, LLP was legal adviser to Gentiva, while Alston & Bird LLP was Harden’s legal adviser. (Reporting By Vrinda Manocha in Bangalore; Editing by Maju Samuel)