Company to reinvest in integrated care markets, home health and hospice acquisitions
LOUISVILLE, Ky. (June 25, 2013) — Kindred Healthcare has signed an agreement to sell eight non-strategic nursing centers for approximately $49 million to affiliates of Signature Healthcare LLC. Each of the facilities is located outside of Kindred’s 21 designated Integrated Care Markets.
Kindred has signed agreements to acquire the assets of home health and hospice companies in its Phoenix and in Virginia Beach-Norfolk-Newport News, Va. The Louisville-based company also has acquired the real estate of a previously leased hospital in Tampa.
Kindred expects that the after-tax net proceeds from the Signature transaction, including transaction costs and tax benefits, will approximate $49 million. Over time, these proceeds will be reinvested in the company’s Integrated Care Markets and used to finance home health and hospice acquisitions.
In the near term, Kindred intends to use the net proceeds to pay down the outstanding balance under its revolving credit facility. At March 31, the outstanding balance on Kindred’s $750 million revolving credit facility approximated $350 million. Kindred expects the Signature transaction will be slightly dilutive to earnings in 2013.
The eight Signature facilities contain 996 licensed nursing center beds. Five of the facilities are owned and three are leased. The facilities generated revenues of approximately $69 million and earnings before interest, income taxes, depreciation and amortization of approximately $8 million (including the allocation of approximately $2 million of overhead costs) for the year ended December 31, 2012. The facilities had aggregate rent expense of approximately $2 million for the year ended December 31, 2012.
The Signature transaction is subject to regulatory approvals and other customary conditions to closing. Kindred expects to complete the transaction in the third quarter of 2013 when these conditions are satisfied.
“The transaction with Signature further accelerates our repositioning strategy with the goal of improving our long-term growth, profitability and financial position. Like the Vibra Healthcare transaction announced in April, this tax-efficient transaction allows us to sharpen our focus on our Integrated Care Markets and provides more capital to grow our home health and hospice operations,” said Paul J. Diaz, Kindred’s chief executive officer.
Home health and hospice acquisitions
A subsidiary of Kindred has signed a definitive agreement to acquire the assets of Arrowhead Home Health Inc. and Arrowhead Hospice Centers Inc. Terms of the transaction were not disclosed. Arrowhead is a home health and hospice provider that operates two locations in the greater Phoenix market.
Arrowhead currently generates annualized revenues of approximately $2.2 million. This transaction is subject to several regulatory approvals and other conditions to closing and is expected to close in the third quarter of 2013.
In the Phoenix market, Kindred currently operates two transitional care hospitals (certified as long-term acute care hospitals). Kindred recently announced that it intends to open a new 120-bed transitional care center (licensed for skilled nursing care) in Phoenix on the campus of IASIS Healthcare’s St. Luke’s Medical Center. The transitional care center will specialize in intensive short-term rehabilitation therapy, including cardiac and orthopedic rehabilitation.
Virginia Beach-Norfolk-Newport News, Va.
A subsidiary of Kindred has signed a definitive agreement to acquire the assets of All Heart Home Health Agency and Hospice Inc. Terms of the transaction were not disclosed. All Heart is a home health and hospice provider that operates two locations in Norfolk.
All Heart currently generates annualized revenues of approximately $5.5 million. This transaction is subject to several regulatory approvals and other conditions to closing and is expected to close in the third quarter of 2013.
In the Virginia Beach-Norfolk-Newport News market, Kindred currently operates three nursing and rehabilitation centers.
Tampa real estate acquisition
Kindred has purchased the previously leased real estate of Kindred Hospital Bay Area-Tampa for approximately $25 million. The annual lease payments for this hospital were approximately $2.5 million. Kindred Hospital Bay Area-Tampa is a 73-bed freestanding transitional care hospital. In the Tampa-St. Petersburg-Clearwater, Fla., market, Kindred currently operates three transitional care hospitals.