CAHF CEO Conference
May 31, 2012
• Genesis HealthCare Overview
• “Go Private” Transaction Overview
• OPCO/PROPCO – REIT Transaction
• Questions and Answers
Today’s Agenda
3
Genesis HealthCare Overview
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).
Genesis HealthCare (Skilled Nursing & Assisted Living)Genesis HealthCare is one of the
nation’s largest long-term care providers.
HistoryGrowth 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
HistoryBankruptcy 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
HistoryRestructuring 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
HistoryRestructuring 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.
• Genesis HealthCare Overview
• “Go Private” Transaction Overview
• OPCO/PROPCO – REIT Transaction
• Questions and Answers
Today’s Agenda
“Go Private” Transaction OverviewWhy 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).
Transaction/ Bidding OverviewEvent Date Price
Large Investment Firm approached management w/ management-led buyout offer
June 2006
Board forms independent special committee
August 2006
Large Investment Firm
September 2006 $51.50 per share
Large Investment Firm
October 2006 $53.00 per share
Special Committee Opens Bidding Process
November 2006
Transaction/ Bidding OverviewEvent Date Price
Large Investment Firm
Early December 2006
$54.00 per share
JER/Formation Early December 2006
$60.00 per share
Fillmore Early December 2006
$58 - $60 per share
Large Investment Firm
January 14, 2007 $57.50 per share
JER/Formation January 14, 2007 $62.50 per share
Fillmore January 14, 2007 $63.00 per share
JER/Formation January 15, 2007 $63.00 per share
JER/Formation and Genesis sign a merger agreement.
January 16, 2007
Transaction/ Bidding OverviewEvent Date Price
Annual meeting postponed and merger agreement amended for smaller break-up fee and removal of standstills
April 19, 2007
Fillmore April 25, 2007 $64.25 per share
Fillmore April 30, 2007 $65.25 per share in cash along with 6% per annum, or $0.01073 per day, increase in price beginning August 15, 2007 until the transaction closes.
Formation May 1, 2007 $65.25 per share in cash along with 9% per annum, or $0.01609 per day, increase in price beginning July 31, 2007 until the transaction closes.
Transaction/ Bidding OverviewEvent Date Price
Fillmore May 7, 2007 $67.25 per share, no interest
Formation May 10, 2007 $67.50, with Interest at 9% Beginning July 31, and 10% Beginning September 1
Fillmore May 10, 2007 $69.00 per share, no interest
Formation May 15, 2007 $68.15, Increasing at 9% per annum Beginning July 31, and at 10% per annum Beginning September 1.
Fillmore May 15, 2007 $69.25 per Share in Cash, Increasing at 8% per annum Beginning September 1 .
Fillmore bid determined superior
May 15, 2007
Transaction/ Bidding OverviewEvent Date Price
Formation May 19, 2007 $69.35 per Share in Cash, Increasing at 9% per annum Beginning July 31, and at 10% per annum Beginning September 1.
Genesis Shareholders approve JER/Formation merger agreement for $69.35 per share with a 9% per annum, or $0.01710 per day increase in price from July 31, 2007 through August 31, 2007, and by approximately 10% per annum, or $0.01900 per day, from September 1, 2007 until the transaction closes.
May 30, 2007
JER/Formation finalize privatization of Genesis HealthCare
July 13, 2007
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
• Genesis HealthCare Overview
• “Go Private” Transaction Overview
• OPCO/PROPCO – REIT Transaction
• Questions and Answers
Today’s Agenda
OPCO/ PROPCO – REIT Transaction
• Transaction Rationale
• Company Performance
• REIT Capital Markets Analysis
• Transaction Preparation
REIT Transaction Rationale
• Strategic alignment with REIT partner
• Maximize investor value
• Access to capital
• Support corporate growth
Genesis Performance
$183.0
$231.5$249.4
$280.0
$316.9
$355.6
$100
$150
$200
$250
$300
$350
2006 2007 2008 2009 2010* 2011P
Annual Consolidated EBITDAR
Health Care REIT’s Trends
REITs Driving Recent Transaction Activity
Transaction Preparation
• OPCO/PROPCO Split• Legal• Tax• Finance• Systems
* Don’t underestimate the magnitude of this process
• Market timing
• Execution
• Post transaction capital needs
• Genesis HealthCare Overview
• “Go Private” Transaction Overview
• OPCO/PROPCO – REIT Transaction
• Questions and Answers
Today’s Agenda