Why Gentiva Health Services, Inc. Stock Is Soaring Today
Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Shares of Gentiva Health Services rose by over 17% this morning after its long, drawn out battle with Kindred Healthcare finally came to an end, with Kindred buying the home health and hospice company for a reported $1.8 billion in a cash and stock deal. Gentiva shareholders will get $14.50 per share and $5 in Kindred stock, per the press release.
As a reminder, Kindred has been attempting to buy Gentiva since May, but was repeatedly turned down because Gentiva viewed the offer as low and the deal would have been to the detriment of its shareholders. What's important to note is that today's agreement is significantly higher than Kindred's initial offers.
So what: Kindred said they would "immediately benefit from the deal by increasing earnings and operative cash flow", according to the press release. Most importantly, this deal will significantly increase Kindred's share of the post-acute and rehabilitation services markets, which are growing rapidly due to an aging U.S. population.
Now what: This deal should result in approximately $1 billion savings due to the synergies created by this buyout. Moreover, Kindred was already on track to generate double-digit earnings growth next year, but this deal should cause earnings to rise on the order of 20% to 30% higher. Kindred's top-line alone will see a boost of more than $2 billion, with the combined company expected to generate sales of $7.1 billion next year. All told, Kindred looks like a compelling growth story to keep tabs on in the wake of its buyout of Gentiva.
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The article Why Gentiva Health Services, Inc. Stock Is Soaring Today originally appeared on Fool.com.George Budwell has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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