NeighborCare to be bought by Pa. chain Genesis Health acquisition valued at $57.25 million

No layoffs anticipated

Baltimore company will add to therapy, prescription services

April 23, 1996|By Bill Atkinson | Bill Atkinson,SUN STAFF

Baltimore's NeighborCare Pharmacies said yesterday that it has agreed to sell the company to fast-growing Genesis Health Ventures Inc. for $57.25 million.

Genesis, a Kennett Square, Pa.-based elder care company, will pay $29.25 million in cash, $10 million in stock, and it will assume $18 million of the privately owned firm's bank debt.

"This merger is not about consolidation, it is about expansion," said Michael G. Bronfein, president and chief executive of NeighborCare. "We can build off of what we both do."

Genesis' stock closed yesterday at $29.875, up 75 cents.

NeighborCare supplies drugs to nursing homes, operates pharmacies in physician office buildings, and provides "infusion therapy," which allows patients needing prolonged treatments -- such as chemotherapy or nutritional therapy -- to receive it at home or in a nursing home.

The company will be merged into Genesis' ASCO Healthcare Inc., a subsidiary that operates medical and surgical companies and provides pharmacy services to nursing homes in states along the East Coast and in the mid-Atlantic region.

Executives said they expect approval from the Federal Trade Commission within about a month.

Mr. Bronfein will become president and chief executive of ASCO. He will be responsible for expanding the professional pharmacy business and infusion therapy throughout the Genesis system.

Genesis likes NeighborCare because it will give the company two new business lines that it can expand: pharmacies in doctors' buildings and infusion therapy.

"This is not just another day at the office," said Michael R. Walker, chairman and chief executive of Genesis. "When you have a strategy that is missing a very necessary piece and you find it, that is exciting."

Mr. Walker doesn't anticipate layoffs, although he sees consolidation among the two companies' institutional pharmacy divisions, which provide prescription drugs to individuals in nursing homes or other institutions. In previous acquisitions, he said, employees were retrained for other jobs.

NeighborCare employs 500 people in Maryland and expects to have revenues of $70 million for its fiscal year ending June 30, up from $52 million in the same period a year earlier.

Mr. Bronfein, a former banker, said the company's goal has been to reach revenues of $250 million.

"We determined that the sale to Genesis provided us with all the benefits of an initial public offering without the economic costs and, more importantly, without the disfocusing effect it can have on an organization," Mr. Bronfein said.

"This is a fit," said Jean Swenson, an analyst with Alex. Brown Inc., who is impressed with Genesis' management. "They don't buy for the sake of buying. What they buy will be strategically enhancing their position. They are very focused and very driven when it comes to that."

Genesis has been on a roll. Last month, it acquired the remaining 71 percent partnership interests of four nursing homes in Maryland, and a 50 percent partnership interest in a center in Florida, from the former owners of Meridian nursing homes.

The company spent about $31.8 million in the transaction.

Genesis bought Meridian in 1993, and now operates more than a dozen former Meridian nursing homes in the Baltimore area. It recently renamed all the homes to consolidate them under the Genesis ElderCare brand name and logo.

Serving 60,000 patients in 12 states, Genesis has 25,000 employees.

Genesis, which has annual revenues of about $600 million, posted $133 million in revenues in its first fiscal quarter, which ended Dec. 31, up 19 percent from the same time a year ago. Net income was up 21.8 percent to $5.9 million.

Mr. Walker said the company has plenty of room to grow. He said there are 3 million people age 65 and older in its market who spend $36 billion on health care annually. Genesis' share is under 2 percent in its market, he said.

"We think we can get 10 percent," Mr. Walker said. "We have a long way to go."

Pub Date: 4/23/96

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