3 Genesis HealthCare Overview Genesis operates more than 200 skilled nursing and assisted living facilities in 13 states along the east coast Focused on higher acuity & medically complex patients A team of 10,000 Genesis Rehabilitation therapists provide rehabilitation and respiratory therapy services in more than 1,100 sites (including Genesis). Genesis HealthCare (Skilled Nursing & Assisted Living) Genesis HealthCare is one of the nation’s largest long-term care providers.
History Growth Phase: 1985: Genesis Health Ventures formed & initiation of public co. 1993 – 1998: Six Major acquisitions 1998: Purchased Vitalink (now LTC and Pharmacy) 1993 – 1998: Raised $2.0 Billion in Capital: Bank Financing Public Subordinated Debt Convertible Debentures Convertible Preferred Securities Private Equity Public Equity
History Bankruptcy Phase: Balanced Budget Act of 1998 creates a quantum change in funding > 70% of revenue came from federal and state gov’t Government slashed reimbursement by 30% 5 major long term care companies file for Bankruptcy GHV files for bankruptcy in June 2000
History Restructuring Phase: October 2001: GHV emerges from bankruptcy 2001: Combined value is $1.5 Billion 2003: Board decides that the LTC and pharmacy businesses should be separated; combined value only at $1.3 Billion December 2003: Genesis HealthCare Corporation is spun-off from GHV February 2004: Omnicare launches hostile takeover. Closes deal at $1.6 Billion
History Restructuring Phase: Genesis HealthCare embarks on an integrated operational, financial and technical strategy. Focuses on internal modernization and select acquisitions. EV at spin-off = $900 million; grows to $1.3 Billion In June 2006, the company looks at strategic alternatives for creating value.
“Go Private” Transaction Overview Why should Genesis consider going private? Market liquidity Cost of being a public company Sarbanes Oxley Managing performance to quarterly expectations Stable reimbursement environment Hostile takeover environment Needed to consider all constituents: Patients and residents Government regulators Board of Directors Employees Shareholders Board decides it is in the best interest of the company to go private. Final deal at $1.9 Billion (July 2007).
Transaction/ Bidding Overview EventDatePrice Large Investment Firm approached management w/ management-led buyout offer June 2006 Board forms independent special committee August 2006 Large Investment Firm September 2006$51.50 per share Large Investment Firm October 2006$53.00 per share Special Committee Opens Bidding Process November 2006
Transaction/ Bidding Overview EventDatePrice Large Investment Firm Early December 2006 $54.00 per share JER/FormationEarly December 2006 $60.00 per share FillmoreEarly December 2006 $58 - $60 per share Large Investment Firm January 14, 2007$57.50 per share JER/FormationJanuary 14, 2007$62.50 per share FillmoreJanuary 14, 2007$63.00 per share JER/FormationJanuary 15, 2007$63.00 per share JER/Formation and Genesis sign a merger agreement. January 16, 2007
Transaction/ Bidding Overview EventDatePrice Annual meeting postponed and merger agreement amended for smaller break-up fee and removal of standstills April 19, 2007 FillmoreApril 25, 2007 $64.25 per share FillmoreApril 30, 2007 $65.25 per share in cash along with 6% per annum, or $0.01073 per day, increase in price beginning August 15, 2007 until the transaction closes. FormationMay 1, 2007 $65.25 per share in cash along with 9% per annum, or $0.01609 per day, increase in price beginning July 31, 2007 until the transaction closes.
Transaction/ Bidding Overview EventDatePrice FillmoreMay 7, 2007$67.25 per share, no interest FormationMay 10, 2007$67.50, with Interest at 9% Beginning July 31, and 10% Beginning September 1 FillmoreMay 10, 2007$69.00 per share, no interest FormationMay 15, 2007$68.15, Increasing at 9% per annum Beginning July 31, and at 10% per annum Beginning September 1. FillmoreMay 15, 2007$69.25 per Share in Cash, Increasing at 8% per annum Beginning September 1. Fillmore bid determined superior May 15, 2007
Transaction/ Bidding Overview EventDatePrice FormationMay 19, 2007$69.35 per Share in Cash, Increasing at 9% per annum Beginning July 31, and at 10% per annum Beginning September 1. Genesis Shareholders approve JER/Formation merger agreement for $69.35 per share with a 9% per annum, or $0.01710 per day increase in price from July 31, 2007 through August 31, 2007, and by approximately 10% per annum, or $0.01900 per day, from September 1, 2007 until the transaction closes. May 30, 2007 JER/Formation finalize privatization of Genesis HealthCare July 13, 2007
Lessons Learned Consider impact on all constituents Effective communication with Board Know your shareholders Understand market dynamics Be prepared to lose control of the process Execution and earnings growth in GHC