Genesis HealthCare amends merger agreement with Formation/JER; Fillmore Capital reacts

By Lisa Kerner

Charlotte. N.C., May 21 - Genesis HealthCare Corp. amended its merger agreement with affiliates of Formation Capital, LLC and JER Partners, increasing the per-share price to $69.35 from $68.15. If the transaction is not completed prior to July 31, the purchase price will increase by roughly 9% per annum, or $0.01710 per day, from July 31 through Aug. 31, and by about 10% per annum, or $0.01900 per day, from Sept. 1 until the transaction closes.

The agreement has been approved by Genesis' board of directors on the unanimous recommendation of its special committee. Shareholders are encouraged to vote in favor of the deal at a special meeting on May 30 at 10 a.m. in Kennett Square, Pa. Only shareholders of record as March 5 are entitled to vote, the company said in a news release.

Genesis' board determined that the amended merger agreement from Formation/JER is superior to the previously announced proposal from Fillmore Capital Partners, LLC offering to purchase the company for $69.25, which would increase by 8% per annum, or $0.01518 per day, from Sept.1 until the transaction closes.

The increased price of the Formation/JER transaction values Genesis at approximately $1.9 billion, including the assumption of $475 million in debt. A termination fee to be paid by Genesis to Formation and JER in the event that Genesis enters into a superior transaction with a third party would be $40 million.

Fillmore, in its news release, said it was not given the opportunity to make a superior bid, despite having offered to acquire the company seven prior times for a higher price than any other existing proposal, and said Genesis' termination of the process was done "in wanton disregard for the interests of the Genesis shareholders."

"Certain members of the Genesis Board have deliberately attempted to create issues where none exist in favor of the other bidder to the detriment of the Genesis shareholders," Fillmore's president and chief executive officer Ronald E. Silva said in the release. "One member of the Board has a personal financial interest in direct conflict with his fiduciary duties to the shareholders in seeing that the other bidder is awarded Genesis. At every opportunity, he and certain members of the board have sought to award Genesis to the other party to the detriment of the shareholders, the patients and Fillmore."

"Because the Genesis board has repeatedly failed to create a level playing field to the detriment of the Genesis shareholders, patients and Fillmore - we end where we started. I can only hope the Genesis shareholders right these wrongs," Silva added.

On May 15, Fillmore upped its bid for Genesis to $69.25, from $69.00, per share in cash, with an increase of 8% per year beginning Sept. 1. The proposal remains in effect until 5 p.m. ET on May 21.

Formation/JER increased its offer on May 15 to $68.15, from $65.25, per share, with a 9% per year increase starting July 31 and a 10% per year increase beginning Sept. 1.

Genesis is a Kennett Square, Pa.-based provider of long-term care services and centers.

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