The amendment to the merger agreement came after Northbrook, IL-based Northbrook GH LLC charged Genesis with "stacking the deck against any other bidder." Northbrook owns approximately 5% of Genesis stock. In a letter to Genesis management, Northbrook estimated the value at between $69 and $71 per share.
In response, Genesis issued a statement saying the bidding was an "active, competitive auction process" and that "none of the offers was anywhere near Northbrook's purported valuation of the company." Following the amended offer, Genesis pushed the shareholder vote to May 4.
"It is important to highlight that $64.25 is our 'best and final' price," say Cia Buckley, president of McLean, VA-based JER's US fund business, and Arnold Whitman, CEO of Alpharetta, GA-based Formation, in a joint statement. "If Genesis shareholders do not vote in favor of this transaction at this price, then JER and Formation will focus our attention on other attractive acquisition opportunities."
"GHC's board of directors believes Formation/JER's increased price represents excellent value and is far superior on a present value basis to what the company could be expected to achieve on a stand-alone basis," says George Hager, Genesis' chairman and CEO, in a statement. A special committee of the board of directors has approved the amended merger agreement and "unanimously" recommended shareholder approval.
Under the amended agreement, Formation/JER's termination fee has been reduced to $15 million versus $50 million. If Genesis shareholders don't approve the transaction, Formation and JER will be entitled to receive up to $7.5 million in expense reimbursement.
GHCI common stock opened trading on the NYSE at $63.29 per share on April 24. It hit a new 52-week high of $64.17 per share on April 19. The 52-week low of $43.71 per share occurred on Aug. 25, 2006. Genesis operates 221 skilled nursing and assisted living properties. A Formation/JER buy-out would take the locally based company private, and it would continue to operate the assets under the Genesis name.
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