Genesis might sell ElderCare

Pa. firm weighs sale or spinoff of nursing, assisted-living homes

October 03, 2002|By Stacey Hirsh | Stacey Hirsh,SUN STAFF

A Pennsylvania company that owns more than 30 nursing and assisted-living homes in Maryland said yesterday that it was considering selling or spinning off its division that oversees those facilities.

Genesis Health Ventures Inc. of Kennett Square, Pa., said it has hired UBS Warburg LLC and Goldman Sachs & Co. to look at "strategic business alternatives." The company is made up of ElderCare, which runs the nursing and assisted-living homes, and NeighborCare, a Baltimore-based pharmacy and medical equipment chain.

ElderCare runs 258 nursing homes and assisted-living facilities in 15 states, including 31 in Maryland. It is the largest provider of long-term care services in Maryland and employs 4,000 in the state.

"Consistent with our previously stated strategic objectives, we are considering these alternatives in order to maximize shareholder value while maintaining our focus on growing NeighborCare, our institutional pharmacy business," Genesis' interim chief executive, Robert H. Fish, said in a statement. "While we will evaluate such alternatives, there can be no assurance that any transaction will be completed."

In July, Genesis said it had a $340 million deal to buy NCS Health Care Inc. of Hudson, Ohio, the fourth-largest U.S. institutional pharmacy company - a deal that would make NeighborCare the second-largest institutional pharmacy in the country. But that deal is currently in dispute because Omnicare Inc. also made a bid to buy NCS.

Lisa Salamon, a Genesis spokeswoman, said the company expects to have more answers about ElderCare in 60 to 90 days, but it is examining shareholder value as it considers what to do with the company.

"Are the two halves worth more separately than they are as a whole?" she said.

If Genesis decides to sell ElderCare, the buyer likely would buy all the facilities and keep them together, because the company is regionally focused with several heavily concentrated areas, including Maryland, said Jerry Doctrow, a managing director who follows senior housing and care for Legg Mason Wood Walker.

Doctrow said a potential sale was unlikely to have an impact on patient care.

"I really would never expect them to be selling off facilities here and there," Doctrow said. "I think the operation would continue; it's just possible someone else might be running it."

Genesis filed for Chapter 11 reorganization protection in June 2000. It is one of five large national chains that filed for bankruptcy in 1999 and 2000, after Medicare cut its payments. The company emerged from bankruptcy one year ago yesterday.

Shares of Genesis gained 25 cents yesterday to close at $17.06 on the Nasdaq stock market.

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