Fillmore gains edge in fight for Genesis

The San Francisco firm’s offer of $69.25 per share has been deemed “superior” by the board of Genesis Health Care—though there is still time for a counter-offer from JER and Formation.

The fight for Genesis Health Care may be close to its end. McLean, Virginia-based JER Partners and healthcare investor Formation Capital have tendered a revised offer for the long-term healthcare facility company, only to be bested by an offer from San Francisco private equity real estate firm Fillmore Capital Partners.

The board of Genesis has determined that the Fillmore offer is “superior” and have advised JER and Formation that they plan to terminate their previously agreed upon merger agreement in four days—unless the investor group wants to sweeten its offer. JER and Formation will receive a $15 million (€11.5 million) termination fee if the deal falls apart.

According to Genesis, Fillmore is offering $69.25 per share in cash, up from a previous offer of $69 per share. Under the terms of the offer, the purchase price will begin increasing at a rate of 8 percent per year beginning September 1 until the deal closes.

Rival bidders JER and Formation are currently offering $68.15 per share, which is up from a prior bid of $67.50 and up from the existing merger agreement price of $65.25. The consortium’s latest offer is set to increase at 9 percent per year beginning July 31 and at 10 percent a year beginning September 1 until the deal is closed.

In early May, Genesis accepted the $65.25-per-share offer from JER and Formation. Last week, both suitors increased their bids: Fillmore offered $69 per share, while the JER-led group offered $67.50 per share.

JER and Formation first announced the deal in January, at a price of $63 per share for the company, a premium of 31 percent over the average share price for the previous month.

Genesis, which is headquartered in Kennett Square, Pennsylvania, operates more than 200 long-term care centers and assisted-living facilities in 13 states in the Eastern US. 

Last July, JER and Formation teamed up to acquire Tandem Health Care, a Florida-based long-term care provider, for $620 million. Prior to that, in June, JER acquired $75 million worth of convertible preferred securities from Chicago-based Aviv Healthcare Properties, which financed the acquisition of triple net-leased healthcare facilities.

Alpharetta, Georgia- and Jenkintown, Pennsylvania-based Formation is focused solely on the nursing home sector. JER Partners, the private equity real estate arm of JE Robert Companies, closed its last US-focused opportunity fund on $823 million in 2004.