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Genesis Health Ventures Announces Revision of Multicare Joint Venture; The Cypress Group and Texas Pacific Group to Invest $50 Million in GHV.

KENNETT SQUARE, Pa.--(BW HealthWire)--Aug. 2, 1999--

Genesis Health Ventures Inc. (NYSE NYSE

See: New York Stock Exchange
:GHV GHV Genesis Health Ventures, Inc.
GHV Gross Heating Value (relationship between volume and corresponding amount of energy for gas) 
) announced today it has reached an agreement in principle with The Cypress Group and Texas Pacific Group (TPG TPG Texas Pacific Group
TPG Tapping
TPG Transports Publics Genevois (Geneva, Switzerland public transportation)
TPG Test Pattern Generator
TPG TNT Post Group
TPG Trésorier Payeur Général
), its co-investor partners in Genesis ElderCare eld·er·care
Social and medical programs and facilities intended for the care and maintenance of the aged.
 Corp. (the joint-venture parent of The Multicare Companies), to simplify the joint-venture structure, accelerate the integration of Genesis and Multicare, and strengthen the financial position of both entities.

Under the agreement in principle, Cypress and TPG will invest $50 million into GHV in exchange for 12.5 million newly issued common shares and 2 million warrants with a $5.00 exercise price.

In addition, Cypress and TPG will terminate their right to put their 56% equity interest in Genesis ElderCare Corp. to GHV in exchange for a newly issued convertible preferred stock Convertible Preferred Stock

Preferred stock that includes an option for the holder to convert the preferred shares into a fixed number of common shares, usually anytime after a predetermined date. Also known as "convertible preferred shares".
 in GHV with a $420 million principal amount, a 5% dividend rate (payable in kind for the first five years) and a conversion price of $8.75 per share.

The conversion price represents a 153% premium to the 20-day average trading price Trading price

The price at which a security is currently selling.
 of GHV stock.

Following completion of this transaction, GHV will consolidate the results of Multicare for financial reporting purposes. After making the $50 million investment, Cypress and TPG will each own approximately 11% of GHV. On fully-diluted basis, assuming conversion of the convertible preferred stock, Cypress and TPG will each own approximately 29% of GHV.

The agreement in principle provides that Cypress and TPG will each have the right to vote a maximum of 17.5% of the voting rights Voting rights

The right to vote on matters that are put to a vote of security holders. For example the right to vote for directors.

voting rights

The type of voting and the amount of control held by the owners of a class of stock.
 of GHV. Cypress and TPG will each designate one member to the GHV Board of Directors, increasing the total membership to nine. The transaction is subject to, among other things, regulatory approval and GHV shareholder approval.

"Our partners at Cypress and TPG have clearly taken a long-term perspective towards Genesis," said Michael Walker There are several people with the name Michael Walker:
  • Michael Walker (actor), an actor; son of Robert Hudson Walker, & brother of actor Robert Walker, Jr.
  • Michael Walker (politician), a councillor in Canada who advocates a Province of Toronto
, Genesis Chairman and Chief Executive Officer.

"We share a common vision of the proactive strategies required to succeed in the prospective payment environment and enthusiasm for the long-term opportunities for the Company. We will continue to aggressively manage through the transition to a prospective payment system, improve our financial flexibility through additional deleveraging transactions and sharpen our focus on our core business segments within specified geographic regions."

"We continue to believe that Genesis is the premier provider of long-term care long-term care (LTC),
n the provision of medical, social, and personal care services on a recurring or continuing basis to persons with chronic physical or mental disorders.
 services," said Jamie Singleton, Vice-Chairman of The Cypress Group. "We believe that the toughest part of the transition to prospective pay is now behind us. By utilizing the strength of the Genesis management team, its regionally concentrated assets and strategic alliances, we believe Genesis will emerge as a long-term leader as the industry grows and consolidates."

"The simplification of the Genesis/Multicare structure facilitates enhanced operational integration, asset rationalization and expanded capital raising opportunities. Together, we can implement a plan to further strengthen the combined balance sheet and create a platform for success," said James Coulter James Coulter was a coach of the University of Georgia Bulldogs football team during the 1909 season. A graduate of Brown University, Coulter had no head coaching experience before leading the Georgia team. , founding partner of TPG.

Walker continued, "We continue to remain focused on reducing corporate and regional costs, pursuing approximately $200 million of additional delevering transactions and providing our customers with high-quality healthcare services. With this transaction, we can eliminate the confusion and uncertainty regarding the Multicare joint-venture structure and move forward in a more rationalized manner. I look forward to working with our partners at Cypress and TPG, as we continue to improve the Company's long-term position."

Merrill Lynch Merrill Lynch & Co., Inc. (NYSE: MER TYO: 8675 ), through its subsidiaries and affiliates, provides capital markets services, investment banking and advisory services, wealth management, asset management, insurance, banking and related products and services on a global basis.  & Co. acted as financial advisor to GHV in connection with this transaction.

Genesis Health Ventures, Inc., a recognized innovator in the healthcare industry, was founded in 1985 to redefine how America cares for the elderly and is dedicated to helping older adults live a full life as independently as possible in their later years.

The company, which consolidated its businesses under the brand name Genesis ElderCare in 1996, has established Genesis ElderCare Networks in five regional markets in the eastern and mid-western United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area.  and currently serves more than 175,000 customers daily.

The Cypress Group, based in New York City New York City: see New York, city.
New York City

City (pop., 2000: 8,008,278), southeastern New York, at the mouth of the Hudson River. The largest city in the U.S.
, manages private equity funds with more than $3 billion in commitments. Texas Pacific Group, based in San Francisco and Fort Worth, manages private equity funds in excess of $4 billion.

Certain of the matters discussed in this news release which are not statements of historical fact are forward looking statements, and because such statements involve risks and uncertainties actual results may differ from those express or implied by such forward looking statements.

Factors that could cause such differences include, but are not limited to those discussed in Genesis' and Multicare's annual reports on Form 10K for the year ended Sept. 30, 1998 and their other public filings with the Securities and Exchange Commission.
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Copyright 1999, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

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Publication:Business Wire
Geographic Code:1USA
Date:Aug 2, 1999
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