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Summary

  • Gentiva has managed to get its buyout offer up from $14 a few months ago to $17.25.
  • However, shares are trading above $18. We didn’t see the buyout coming, but welcome it as it puts shares above our price target.
  • We’d look to be sellers here even though management is heavily invested in getting an even higher offer.

Last week Gentiva Health Services (NASDAQ:GTIV) saw yet another offer from Kindred Healthcare (NYSE:KND), offering to buy the entire company for $17.25. Shares are now trading above $18. This puts the stock up 45% since we first profiled it in September. This is just the latest offer in what's been a multi-month back and forth.

Back in May, Kindred wanted to buy the company for $14, but Gentiva rejected. It then upped that offer to $14.50 in June. In an effort to justify the rejection of Kindred's offer, Gentiva said it was mulling a takeover of Amedisys (NASDAQ:AMED). Kindred eventually offered $16 a share for 14.9% of the company in July, only to be rejected again because an undisclosed party offered to buy all of Gentiva for $17.25. Kindred has matched the $17.25 offer. As mentioned, shares are trading at an over $1 a share to the buyout offer. The market is banking on a bidding war between Kindred and the undisclosed party.

The bidding up of Gentiva has sent it well above our near $16 price target. Shares are now trading at 18x next year's earnings estimates. We would look to pocket profits. However, we wouldn't be surprised to see Gentiva hold out for a price closer to $20. Back in September we noted that, "We like the fact that management has a vested stake in GTIV owning 11% of the company. We also like the fact that noted health care investor Larry Feinberg is a shareholder as well. His Oracle Investment Management has a 5% stake. Larry Feinberg has been an investor and analyst in the healthcare sector for over 30 years." Management likely wants to get back to even where shares are essentially flat over the last three years.

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Source: Update: Gentiva Health Services Buyout Offer