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Genesis HealthCare: Exploring the "Go Private" Transaction and REIT Opportunities

The Genesis HealthCare presentation outlines the company's history as a major long-term care provider, detailing its evolution through various phases, including restructuring, bankruptcy, and strategic transactions. Focused on higher acuity patients, Genesis operates over 200 facilities along the East Coast and employs 10,000 rehabilitation therapists. The agenda covers the rationale behind going private, market dynamics, and the OPCO/PROPCO split in the context of REIT transactions. Important lessons learned emphasize the need for effective communication and stakeholder consideration in strategic decisions.

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Genesis HealthCare: Exploring the "Go Private" Transaction and REIT Opportunities

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Presentation Transcript

  1. CAHF CEO Conference May 31, 2012

  2. Today’s Agenda • Genesis HealthCare Overview • “Go Private” Transaction Overview • OPCO/PROPCO – REIT Transaction • Questions and Answers

  3. Genesis HealthCare Overview Genesis HealthCare (Skilled Nursing & Assisted Living) Genesis HealthCare is one of the nation’s largest long-term care providers. • 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). 3

  4. 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

  5. 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

  6. 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

  7. 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.

  8. Today’s Agenda • Genesis HealthCare Overview • “Go Private” Transaction Overview • OPCO/PROPCO – REIT Transaction • Questions and Answers

  9. “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).

  10. Transaction/ Bidding Overview

  11. Transaction/ Bidding Overview

  12. Transaction/ Bidding Overview

  13. Transaction/ Bidding Overview

  14. Transaction/ Bidding Overview

  15. 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

  16. Today’s Agenda • Genesis HealthCare Overview • “Go Private” Transaction Overview • OPCO/PROPCO – REIT Transaction • Questions and Answers

  17. OPCO/ PROPCO – REIT Transaction • Transaction Rationale • Company Performance • REIT Capital Markets Analysis • Transaction Preparation

  18. REIT Transaction Rationale • Strategic alignment with REIT partner • Maximize investor value • Access to capital • Support corporate growth

  19. Genesis Performance

  20. Health Care REIT’s Trends

  21. REITs Driving Recent Transaction Activity

  22. Transaction Preparation • OPCO/PROPCO Split • Legal • Tax • Finance • Systems * Don’t underestimate the magnitude of this process • Market timing • Execution • Post transaction capital needs

  23. Today’s Agenda • Genesis HealthCare Overview • “Go Private” Transaction Overview • OPCO/PROPCO – REIT Transaction • Questions and Answers

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