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Genesis HealthCare: Begging for a buyout doesn't work

Posted Apr 20th 2007 3:40PM by Tom Taulli (RSS feed)
Filed under: Private Equity

Private equity firms Formation Capital LLC and JER Partners tried hard for their $1.25 billion offer for Genesis HealthCare Corp. (NASDAQ: GHCI). But Institutional Shareholder Services thought the valuation was too low and that shareholders should reject the offer.

In response, Genesis wrote a letter to shareholders – practically begging them to vote for the deal.

Well, money works better. So, this week, Formation and JER upped their offer from $63.00 to $64.25 per share. That translates to a market value of roughly $1.7 billion (including the assumption of $475 million in debt). It's also the "best and final offer."

Lately, hedge funds have been getting more aggressive on buyout scenarios. By purchasing big positions in the stock, they can exert lots of power on a deal. And that appears to be the case with Genesis.

On the news, the stock price is up $0.22 to $63.34.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.

Genesis HealthCare begs shareholders for buyout deal

Posted Apr 10th 2007 2:38PM by Tom Taulli (RSS feed)
Filed under: Private Equity

The powerful shareholder advisory firm, Institutional Shareholder Services (ISS), indicated that shareholders should reject the $1.25 billion buyout of Genesis HealthCare Corp. (NASDAQ: GHCI). The buyers include private equity firms Formation Capital LLC and JER Partners.

Apparently ISS thinks that other bidders didn't have a chance to make a play for the company. In other words, Genesis shareholders may be leaving money on the table.

Genesis, of course, begs to differ. In fact, the company wrote a letter to shareholders saying that the deal is "compelling" and is valued at "all-time" highs for financial multiples for Genesis. Besides, the deal is getting close to completion and there could be a drop in the stock price if things don't go through.

Investors, however, don't seem to agree. The stock price for Genesis is currently at $63.26, above the buyout price of $63. In other words, meaning they think the price will get bumped up.

Tom Taulli is the author of various books, including the Complete M&A Handbook and the EDGAR-Online Guide to Decoding Financial Statements.