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 KING OF PRUSSIA, Pa., Oct. 21 /PRNewswire/ -- NovaCare, Inc. (NYSE: NOV) and RehabClinics, Inc. (NASDAQ: RCII) today jointly announced the signing of a definitive agreement and plan of merger. Under the terms of the agreement, RehabClinics will become a wholly owned subsidiary of NovaCare.
 NovaCare is an industry leader in comprehensive rehabilitation services. RehabClinics is the nation's premier provider of outpatient physical therapy services, operating 180 clinics in 22 states. The transaction will make NovaCare one of the largest providers of comprehensive rehabilitation services in the United States with annualized revenues exceeding $700 million (based on recent quarterly results, adjusted for RehabClinics' recent acquisition of Pat Croce's SPORTS Physical Therapists).
 "The acquisition of RehabClinics will extend NovaCare's rehabilitation services to the strategically important outpatient setting," said Francis W. Cash, president and chief operating officer of NovaCare. "The accelerating trend toward a health care system organized around managed care and other large purchasing groups affirms NovaCare's strategy of being a single, large-scale provider of efficiently delivered rehabilitation services."
 Under the terms of the agreement, each share of RehabClinics common stock will be exchanged for 1.6 shares of NovaCare common stock. At Sept. 30, RehabClinics had approximately 8.9 million shares outstanding. NovaCare, with approximately 49.6 million shares outstanding, will issue approximately 14.2 million shares to complete the transaction. The merger has been approved by the boards of directors of NovaCare and RehabClinics following recommendations by a special committee of each company's board.
 "The outpatient setting is a critical missing link in NovaCare's continuum of rehabilitation services," added Mr. Cash. "With RehabClinics, we are acquiring a company with established market positions and a reputation for clinical excellence and high quality customer service."
 "As a leader in consolidating the outpatient physical therapy industry, we see many attractive acquisition opportunities," said James C. New, president and chief operating officer of RehabClinics. "The merger with NovaCare gives us the capital and support function resources that we need to continue our consolidation of this attractive industry."
 "Today's health care reform initiatives should have positive implications for NovaCare, given the proven cost-effectiveness of rehabilitation and the trend toward treating individuals in lower cost settings, like nursing homes and outpatient clinics -- which will be NovaCare's largest markets," said John H. Foster, chairman and chief executive officer of NovaCare.
 John H. Foster is also chairman and chief executive officer of RehabClinics, which he founded in December 1990 with funds provided by venture capital partnerships controlled by Foster Management Company. Foster Management, under the leadership of Mr. Foster, occasionally serves as a business development vehicle for NovaCare. Accordingly, in evaluating the transaction, a special committee of NovaCare's board of directors engaged Hughes, Hubbard & Reed as independent counsel for the transaction and Smith Barney Shearson Inc. as financial advisor. Fried, Frank, Harris, Shriver & Jacobson acted as legal counsel to the special committee of RehabClinics' board of directors and Lehman Brothers, Inc. acted as financial advisor.
 The merger is subject to the approval of the holders of a majority of the outstanding shares of NovaCare common stock voting on the transaction and the holders of a majority of the outstanding shares of RehabClinics' common stock voting on the transaction (other than shares beneficially owned by Mr. Foster). The merger is also subject to various other conditions including the receipt of opinions that the transaction will be treated as a pooling of interests and as a tax-free reorganization and the expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act. Subject to satisfaction of these conditions, it is expected that the merger will close in early 1994.
 To enable NovaCare's stockholders to consider the merger proposal along with such other business already scheduled, NovaCare has postponed its annual meeting of stockholders previously scheduled for Oct. 28, 1993, and will reschedule it for a new date, time and place to be announced.
 NovaCare, Inc. is the largest provider of contract medical rehabilitation therapy and orthotic and prosthetic patient care services in the United States. In addition, the company operates 12 acute care medical rehabilitation hospitals and a number of freestanding comprehensive outpatient rehabilitation facilities and community integrated programs. With operations in 42 states, NovaCare employees currently treat more than 26,000 patients per day. NovaCare's net revenues and operating profits for the fiscal year ended June 30, 1993 were $539 million and $79 million, respectively.
 RehabClinics is the nation's largest outpatient physical therapy company. RehabClinics' strategy is to develop an extensive network of outpatient physical therapy clinics in selected markets through acquisitions and internal growth. For the three months ended June 30, 1993, RehabClinics generated net revenues and operating profits of $18 million and $2.3 million, respectively.
 -0- 10/21/93
 /CONTACT: Analyst: Susan J. Campbell, director of investor relations of NovaCare, 215-992-7425; James C. New, president and chief operating officer of RehabClinics, 215-992-7601; Alan Vinick, chief financial officer of RehabClinics, 215-992-7611; or Media: Carol J. Klein, vice president-communications of NovaCare, 215-992-7240/

CO: NovaCare, Inc.; RehabClinics, Inc. ST: Pennsylvania IN: HEA SU: TNM

LG -- NY024 -- 5060 10/21/93 10:16 EDT
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Publication:PR Newswire
Date:Oct 21, 1993

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