Gentiva lightens load, sharpens focus

Tuesday, September 30, 2008

MELVILLE, N.Y.--Gentiva Health Services will sign over a controlling interest in CareCentrix, a provider of home nursing, infusion and home medical equipment, to a healthcare-focused private equity firm, the company announced in late August.

Per the transaction, valued at $147 million, Chicago-based Water Street Healthcare Partners will acquire a 69% controlling interest in CareCentrix. Gentiva will retain the remaining 31%, worth about $26 million.

The move allows Gentiva “to sharpen its focus on accelerating growth in its core home care and hospice provider businesses, both organically and through acquisition,” the company stated in a release.

“Separating CareCentrix enables us to devote Gentiva’s full resources and attention to the extraordinary growth potential in our home care business, including our industry leading specialty programs,” said Gentiva Chairman and CEO Ron Malone. “Going forward Gentiva will generate 95% of its revenues from home health and hospice services. By separating CareCentrix at this juncture, we are both unlocking value for shareholders today and preserving the potential to deliver future value.”

Upon closing the transaction, Gentiva will receive $84 million in cash and a $25 million interest-bearing seller note. The company will use $26 million in proceeds from the sale to fund future acquisitions. Gentiva will use the remaining proceeds to repay term loan debt and reduce the company’s leverage ratio.

CareCentrix generated revenues of $309 million in the year ended June 29, 2008, with 82% of revenues generated from its national homecare contract with Cigna Healthcare.
Gentiva started CareCentrix in 1996.

CareCentrix delivers home nursing, infusion, home medical equipment and ancillary services to more than 10 million members of managed care organizations nationwide through a network of 4,000 credentialed homecare providers.

CareCentrix is based in Melville, N.Y., but it has significant regional operations in Hartford, Conn.; Tampa, Fla.; and Phoenix.

Water Street believes CareCentrix “can play an even bigger and more impactful role in achieving positive outcomes as more organizations utilize home health products and services as a primary approach for providing quality, cost-effective care,” the company stated in the release.