June 11, 2015 / 1:00 PM / 4 years ago

UPDATE 2-HealthSouth to buy rehab hospital operator for $730 mln

* Deal to immediately add to HealthSouth’s earnings after closure

* May expand home health offerings in the new markets - analyst

* Shares rise as much as 10 pct (Adds analyst comments)

By Amrutha Penumudi

June 11 (Reuters) - HealthSouth Corp said it would buy a private rehabilitation hospital operator for $730 million in cash to take its post-acute care business into new markets.

The company’s shares rose as much as 10 percent in morning trading on the New York Stock Exchange on Thursday.

The acquisition of Reliant Hospital Partners will strengthen HealthSouth’s position in the Houston, Dallas-Fort Worth and Austin, Texas markets, while giving it new locations in Abilene, Texas; Dayton, Ohio; and the Boston area.

Reliant, with a total of 902 beds, operates 11 in-patient rehabilitation hospitals and three in-patient satellite locations.

The company reported revenue of about $249 million in 2014.

HealthSouth said it would fund the acquisition with cash on hand and an issue of senior notes.

The deal offers HealthSouth, already the largest U.S. in-patient rehabilitation facility provider, the chance to push on and dominate local markets.

The company bought Encompass Home Health and Hospice in November to strengthen its other business - home health - by adding 140 locations in 13 states.

HealthSouth is likely to rapidly scale up its home health offerings in the markets it is entering by launching new home health agencies or snapping up smaller rivals, Obsidian Research Group analyst Toby Wann said.

In-patient rehabilitation, which helps people regain strength and mobility after illness or surgery, is HealthSouth’s largest business, generating about $630 million in revenue in the first quarter of 2015.

The post-acute care industry has been consolidating as companies seek to expand both geographically and in terms of the range of services on offer.

Kindred Healthcare Inc bought Gentiva Health Services Inc last year, while Skilled Healthcare Group Inc bought privately owned Genesis HealthCare.

Wells Fargo Securities is HealthSouth’s financial adviser, while Skadden, Arps, Slate, Meagher & Flom LLP is its legal adviser.

Goodwin Procter advised Reliant Hospital Partners.

HealthSouth’s shares were up 6.9 percent at $46.31 in late morning trading. Up to Wednesday’s close, the stock had risen 12.5 percent this year. (Reporting by Amrutha Penumudi in Bengaluru; Editing by Ted Kerr and Simon Jennings)

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