Saturday, May 17, 2014

Kindred Gentiva Choose Sides for Battle


The chaos at Gentiva stands to grow several orders of magnitude with Kindred's hostile takeover.  It comes as Gentiva (per recent investor presentations):

1) Closed or consolidated nearly 100 locations (35-40 of which overlapped markets)

2) Had negative cash flow due to interest payments on debt and annual incentive compensation (including executive incentive pay)

3) Called for local marketers to sell home health, hospice and community care services.  Also, Executives do sales calls with teams every other month.

4) Conducted branch by branch clinician rationialization, i.e. slashed staffing yet again (in Q1, March at latest for some branches)

5)  Bonds are callable in August, but the company needs to focus on completing the Harden integration in the meantime.

6)  Gentiva would seek to acquire other companies in our space come August or September.  

"Future fisher" Gentiva is now the bait.  Kindred struck the day after Gentiva presented at the Bank of America-Merrill Lynch Healthcare Conference.  Battle teams have been assembled.   

Gentiva Health Services has engaged Kekst and Company for PR support as it works to fend off a $533M hostile bid from hospital operator Kindred Healthcare.

Joele Frank, Wilkinson Brimmer Katcher is working with Louisville, Ky.-based Kindred, which has also engaged proxy solicitation firm D.F. King & Co.

Gentiva also hired law firm Greenberg Traurig and financial advisors Barclays Capital and Edge Healthcare Partners. Kindred is working with Cleary Gottlieb Steen & Hamilton and Citi. 

This will consume top leadership time and attention.  It also will take huge chunks of money, as none of the above organizations work cheap.

Both sides will sell hard to institutional holders like Blackrock, Wells Fargo, Vanguard, Dimensional Fund and hedge funds like Mario Gabelli's GAMCO and Larry Feinberg's Oracle Partners.  Executive officers and board members hold roughly 19% of Gentiva's total shares.  Employees remain peons in a proxy fight.

The interesting piece is the promotion of David Causby to President and Chief Operating Officer.  That came the day before Kindred went public with their $14 per share offer.  CEO Tony Strange and Causby spoke to employees in a conference call, promising to keep staff informed every step of the way.

Gentiva executives are in the fight for their life, only they have golden parachutes to fall back upon.  The rest of us aren't so lucky.  The corporate battle is just beginning.  Gentiva's level of chaos stands to grow exponentially, leaving employees and patients vulnerable to inattention and ongoing management abuse.  Just when I thought it couldn't get any worse....


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