Nov. 4--Swallowing a company nearly 60 percent of its own size, St. Louis-based RehabCare Group said Tuesday that it will pay $570 million for Triumph HealthCare of Houston.
RehabCare, a provider of rehabilitation services, will pay for the deal through bank loans, cash on hand and the selling of convertible preferred stock. The price equals 6.2 times Triumph's earnings before taxes, interest, depreciation and amortization.
RehabCare said it expects the deal to raise earnings per share in 2010.
Triumph operates long-term acute-care hospitals, including 20 hospitals in seven states. RehabCare owns rehabilitation and acute-care hospitals and provides rehabilitation services in 1,250 nursing homes and hospitals in 41 states.
The deal will make RehabCare the nation's fourth-largest operator of post-acute hospitals and the third largest provider of long-term acute care hospitals. The combined company will have 29 long-term hospitals and six inpatient rehabilitation centers in 13 states.
The companies operate in 18 of the same markets, creating a "bunch of market synergies," said RehabCare CEO John Short in a conference call late Tuesday.
The company's hospital division administration will move to Houston and operations such as payroll, legal and compliance will be concentrated in St. Louis. Those moves will save about $5 million or $6 million, the company said.
Triumph, which is privately held, had revenue of about $440 million for the past 12 months.
RehabCare reported $743 million in revenue for 2008.
Also Tuesday, RehabCare reported a profit of $6.8 million, or 37 cents per share, for the third quarter, compared to $4.0 million, or 22 cents per share, for the same period a year earlier. Revenue jumped 15 percent to $208 million.
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