This comes after a March 29 complaint, filed by Drumm Investors LLC in the Chester County Court of Common Pleas, alleging that Genesis breached commitments to Drumm in connection with the bidding process. Drumm owns Genesis rival Beverly Enterprises Inc. Genesis terms the lawsuit "without merit" and says it will "vigorously defend itself against the claims."
In the shareholder letter, Genesis says, "The final offer price was driven by an active, competitive auction involving all likely, credible bidders, which yielded four highly interested bidders all of whom submitted 'best and final' offers--none of these bids was higher than the final transaction price." It followed the letter with an announcement that Vienna, VA-based Proxy Governance Inc., an independent proxy advisory that evaluates proxy issues, also recommends that shareholders vote for the offer.
In response to Genesis' letter to shareholders, Northbrook GH LLC, which owns slightly more than 5% of Genesis stock, wrote to Genesis principals and filed its letter with the SEC. It reads, "we are particularly disturbed by the outright distortions, half-truths and omissions contained in your letter."
It charges that Genesis "stacked the deck against any other bidder by implementing a preclusive $50-million termination fee to discourage competing bids." It also says that Institutional Shareholder Services recommended that shareholders vote against the (Formation/JER) merger because "the number of parties contacted [to bid] was on the low end."
Northbrook also says Genesis' letter to stockholders does not explain that one bidder "was not given the opportunity to raise its bid." It estimates a per-share value of "between $69 and $71 per share." The Formation/JER offer is for $63 per share.
In a statement, Genesis responds to Northbrook by reiterating the "active, competitive auction process," and adds, "Even though the bidders had every incentive to submit their best offer, none of the offers was anywhere near Northbrook's purported valuation of the company. Northbrook appears to be suggesting that shareholders should forego the certainty of a $63 all-cash offer for the uncertainty of an unknown alternative."
The Formation/JER offer, as GlobeSt.com reported, has an aggregate value of approximately $1.7 billion, including the assumption of about $450 million in debt. At the time of the offer in January, the price represented a premium of 31.1% above the average closing price of GHCI stock over the past 30 trading days.
On the day of the offer, GHCI shares on the Nasdaq jumped from $52.85 per share to $61.48 per share. They have since hit a high of $63.66 per share and continue to hover near the $63-per-share range. The shareholder meeting and vote is scheduled for April 19.
The acquisition by Alpharetta, GA-based Formation and McLean, VA-based JER would take Genesis private. The locally based company, which operates 221 skilled nursing and assisted living properties, would continue to operate them under the Genesis name.
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