ElderCare will continue to be headquartered here. Nearly one-fifth of its facilities are in Pennsylvania. NeighborCare is, and will remain, based in Baltimore. Each entity currently represents about one half of Genesis' current $2.6 billion in annual revenues.
Genesis emerged from bankruptcy in October 2001 and has $646 million in debt. Last year it strengthened its emphasis on the faster-growing pharmacy business. According to published reports, a half-dozen potential buyers are in the process of preparing bids to buy the ElderCare portion of Genesis.
The spin-off transaction is expected to be a tax-free transaction to shareholders and be completed by the end of this calendar year. Operating as a separate company, ElderCare "will be able to enhance value by improving operating efficiencies, divesting non-core assets and investing selectively to improve revenue quality," said Robert H. Fish, current chairman and CEO of Genesis.
"NeighborCare will be better positioned for growth through investments and acquisitions, and for marketing its services more effectively without a corporate affiliation to Genesis ElderCare, its largest long-term customer," he said. "In addition, each company will be exposed only to the operating risks inherent in its own business operations." Like all nursing care facilities, risks to ElderCare include rising medical malpractice insurance costs and potential cuts in federal and state Medicare and Medicaid payments.
Fish will continue to lead NeighborCare. George V. Hager Jr., current EVP and CFO of Genesis, will lead the independent ElderCare company as CEO.
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