Kindred Healthcare proposes to acquire all outstanding shares of Gentiva

LOUISVILLE, Ky.--()--Kindred Healthcare, Inc. ("Kindred" or the "Company") (NYSE:KND) today announced a proposal to acquire all of the outstanding shares of common stock of Gentiva Health Services, Inc. ("Gentiva") (NASDAQ:GTIV) for a combination of $7.00 per share in cash and $7.00 of Kindred common stock. Kindred also offered to increase its offer to 100% cash if the Gentiva Board so elects.

Based upon the closing price of Gentiva's common stock on May 14, 2014, Kindred's proposal would provide Gentiva shareholders with consideration currently valued at approximately $14.00 per share, representing a 64% premium over the closing price of Gentiva common stock on May 14, 2014, and a 59% premium over Gentiva's 60-day volume-weighted average closing price. The proposed price for Gentiva implies a total equity value of approximately $533 million. With the assumption of Gentiva's debt, the transaction would be valued at approximately $1.6 billion.

The combination of Kindred and Gentiva would further enhance Kindred's position as the nation's premier post-acute care provider. The combined company would:

• Serve nearly 127,000 patients per day;
• Operate in 47 states;
• Employ approximately 110,000 individuals, making it the 78^th largest private employer in the United States;
• Deliver pro forma annual revenues of approximately $7.2 billion; and
• Generate pro forma EBITDAR of nearly $1 billion.

Paul J. Diaz, Chief Executive Officer of the Company, said, "This compelling combination would unite two highly complementary businesses by joining Kindred's resources with Gentiva's home health and hospice capabilities. Together we would create a unique platform to 'Continue the Care' by delivering patient-centered care across the full spectrum—from hospital to outpatient facility to the patient's home. The combined company's national footprint would allow it to deliver enhanced coordinated care, helping to transition patients home more quickly and provide more patient-centric, cost-effective treatment. We would also benefit from cost, capital and revenue synergies as well as enhanced relationships with physicians and managed care organizations, augmenting our platform for value- and risk-based payment models."

Gentiva shareholders would benefit from a significant and immediate premium, a meaningful dividend, accelerated growth and the enhanced financial strength of the combined company. Kindred believes the transaction would be highly accretive to earnings and operating cash flows, exclusive of one-time items related primarily to transaction and integration costs. Kindred expects the combined company would have operating and financial synergies of approximately $60 million to $80 million within a period of two years following consummation of the acquisition, with $40 million expected in the first year after closing.

Mr. Diaz added, "Kindred, together with Gentiva, would help accelerate the evolution of population health and medical homes through our combined national platform, and the adoption of best practices in innovation and clinical care in more local communities. With greater financial flexibility and a lower cost of capital, the combined company would be able to invest in clinical programs, information technology and infrastructure to improve care management and clinical outcomes, drive growth, reduce costs and deliver value for our patients, payors, hospital and physician partners, and shareholders."

Mr. Diaz concluded, "The strategic and financial benefits of the proposed transaction are highly compelling, and we are confident that it would create more value for Gentiva stakeholders than Gentiva could achieve on a standalone basis. Our proposal provides a significant and immediate premium for Gentiva shareholders, while allowing them to benefit from the upside potential inherent in this combination. We have undertaken extensive efforts and had several private discussions with Gentiva's management team in an effort to engage Gentiva on a mutually acceptable transaction. Gentiva has indicated repeatedly that it is not willing to discuss a transaction at this time. As such, we have elected to make our compelling proposal known to Gentiva's shareholders—a proposal that represents a 64% premium to yesterday's closing price and a 40% premium to Wall Street analysts' one-year median price target of $10.00 per share. We strongly believe that many of Gentiva's shareholders, and in particular the greater than 20% who are also shareholders of Kindred, would support the transaction and favor the stock of the combined company if given an opportunity. We look forward to the opportunity to engage with Gentiva's Board and management team to discuss our proposal and agree upon the terms of a transaction that benefits both companies and all of our stakeholders. Kindred is ready and willing to complete this transaction, and we are prepared to take the necessary steps to realize the benefits inherent in this proposed combination."

Benjamin A. Breier, President and Chief Operating Officer of the Company, said, "Kindred has an outstanding track record of successfully integrating acquisitions and a history of operational excellence. This transaction would position the combined company for accelerated growth and advance our mission of promoting healing, providing hope, preserving dignity and producing value for every constituent we serve. We would be excited to welcome Gentiva's 47,000 talented employees to join us in this mission as part of the Kindred family."

Mr. Breier added, "Kindred's teammates are the heart of our culture and have made Kindred one of Fortune Magazine's Most Admired Healthcare Companies six years in a row. In recent years, Kindred has taken a series of steps to strengthen and grow our operations; we believe this transaction would be a logical extension of our successful repositioning efforts. Our combined scale and resources would also facilitate job creation, and allow for greater investment in the professional development and career advancement of our teams. We look forward to the opportunity to bring Gentiva's employees together with the team members of Kindred, and believe our combined talents would help us make even greater strides in clinical innovation and excellence."

Stephen D. Farber, Executive Vice President and Chief Financial Officer of the Company, said, "From a financial perspective, this combination checks all of the boxes: a compelling and immediate premium for Gentiva, meaningful accretion for Kindred shareholders, and the opportunity for shareholders of both companies to participate in the accelerated growth of the combined company. We have structured the proposed combination with a mix of debt, equity and other instruments to maintain Kindred's existing leverage profile and deleveraging cadence. The combined company would have the financial strength and investment capacity to support our nationwide operations and our 110,000 teammates, as well as accelerate investments in further expanding our 'Continue the Care' delivery model."

Below is the text of a letter that was sent on May 5, 2014, to Mr. Rodney Windley, Executive Chairman of the Board of Directors of Gentiva, and Tony Strange, Chief Executive Officer, President and member of the Board of Gentiva.

In response, Gentiva sent the following letter to Kindred:

Citi is acting as financial advisor to Kindred and Cleary Gottlieb Steen & Hamilton LLP is acting as legal advisor.

Conference Call and Additional Presentation Materials

Kindred's management team will be discussing the proposed transaction with analysts and investors on a conference call today at 8:30 a.m. (Eastern Time). Interested parties can participate in the conference by dialing (888) 802-8577 (U.S.) or (404) 665-9928 (International), conference code 47570847, five to 10 minutes prior to the start of the call. A live webcast is also accessible on the Company's website at www.kindredhealthcare.com. The conference call webcast will feature accompanying slides, which can be accessed through the Investor Relations section of the Company's website.