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RehabCare Announces Definitive Agreement to Acquire Symphony Health Services

Posted on: Wednesday, 3 May 2006, 18:00 CDT

Combination with Contract Therapy subsidiary, RehabWorks, Creates Premier Rehabilitation Program Management Services Company for the Post-Acute Continuum

RehabCare Group Inc. (NYSE: RHB), a leading national provider of physical rehabilitation program management services, today announced that it entered into an agreement to acquire Symphony Health Services, a leading provider of contract therapy services in the nation with annual revenue of over $230 million, for cash consideration of $101.5 million. The transaction is expected to yield a $15 million NPV tax benefit for the company. RehabCare expects to harvest $8.0 million to $12.0 million in annualized synergies over the next 24 months to add to Symphony's 2005 adjusted EBITDA of $8.0 million. The transaction accelerates RehabCare's market-based strategy of providing post-acute continuums of care by integrating RehabCare, the largest provider of rehabilitation services in hospitals, with Symphony Health Services, whose RehabWorks subsidiary is one of the leading providers of services to long-term care facilities. The combined organization will be one of the largest providers of rehabilitation program management services in the United States, with nearly 15,000 employees servicing approximately 24,000 patient visits per day in more than 1,400 facilities, including hospitals, nursing homes and other long-term care facilities in 42 states, the District of Columbia and Puerto Rico.

John H. Short, Ph.D., President and Chief Executive Officer of RehabCare, indicated, "Our acquisition of Symphony Health Services is a unique opportunity to combine the services and best practices of the two largest providers of contract therapy in the United States. RehabCare will achieve a broader client base, as well as an enhanced geographic network. The combination will create a scalable, responsive, single source provider of rehabilitation program management services necessary to compete in today's fast-growing healthcare marketplace."

Symphony Health Services is a comprehensive family of companies focused on providing contract therapy, nursing and healthcare consulting services for the post-acute industry. Collectively, Symphony Health Services delivers a variety of quality-driven products and services, including advanced clinical programs and quality management programs. The company is comprised of three primary subsidiaries:

-- RehabWorks, founded in 1978, has more than 4,000 employees, and provides physical therapy, occupational therapy, speech-language pathology, wellness/fitness, and short-term staffing services to over 500 facilities. The combined company will blend the experience, technology and geographic reach of the two leading organizations.

-- VTA Management Services provides contract therapy staffing for the healthcare and educational markets in the New York Metropolitan area and throughout New York State. VTA brings further diversification through its focus on the educational settings.

-- Polaris Group has provided strategic consulting services to post-acute healthcare providers since 1988, integrating nursing, operational, regulatory and financial expertise. Drawing from the expertise of its consultants and over 1,500,000 days of patient benchmarking data, Polaris provides consulting services, performance assessments and strategic planning to numerous customers throughout the long-term care industry. With Polaris and RehabCare's Phase 2 Consulting, which focuses on the Hospital market segment, the company will provide a comprehensive array of consulting services to the healthcare industry.

R. Scott Jones, President and Chief Executive Officer of Symphony Health Services, added, "Together, we are creating a world-class company with greater efficiencies and economies of scale. There is a strong alignment in our cultures, values and service delivery methods. We expect our patients and customers to benefit from the blending of our two organizations."

Mr. Jones continued, "Over the past two years, Symphony Health Services has dedicated significant resources to its Quality Management initiatives. Among them was the development and implementation of advanced leadership and clinical training which was provided to more than 500 of our field managers at our corporate training center. This investment has resulted in rapid improvements along with the expansion of our product offerings into such areas as Wellness and Clinical Outcomes Management. We look forward to completing the transaction."

RehabCare believes that this transaction represents a natural next step in its business, and creates a stronger, more vital company with the scale, reach and vision to service the full post-acute continuum. Together, the combined company will rank among the largest employers of therapists in the country and will possess unmatched expertise in leading-edge clinical approaches, as well as a greater voice in the industry to ensure that patients continue to have access to quality therapy services. The combination leverages the best practices of both RehabCare and Symphony Health Services in productivity and quality management, and thus increases the resources available for R&D and other innovation. Patients, customers and employees will benefit from expanded product offerings, broader geographic reach, enhanced clinical programming and training programs, improved clinical automation, including a hand-held Palm for patient documentation, and improved connectivity to academic and research resources.

RehabCare expects the acquisition will not be dilutive in the second half of 2006. Cost savings from the $8.0 million to $12.0 million annualized synergies will begin to be realized in the fourth quarter of 2006 and throughout the following 24 months. To finance this transaction, RehabCare expanded its Senior Credit facility commitment from $90 million to $150 million. The transaction has been approved by the Board of Directors of RehabCare, and the members of Symphony Health Services LLC, and following the receipt of governmental clearance, is expected to close on or about June 30, 2006. Merrill Lynch & Co. acted as financial advisor to RehabCare. Thompson Coburn LLP acted as legal advisor to RehabCare and DLA Piper Rudnick Gray Cary acted as legal advisor to Symphony Health Services.

Following the close of the transaction, R. Scott Jones will remain as President and CEO of Symphony Health Services during the integration period, reporting to Dr. Short, and will lead a transition team comprised of both RehabCare and Symphony Health Services executives.

This press release contains forward-looking statements that are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties that may cause our actual results in future periods to differ materially from forecasted results. These risks and uncertainties may include but are not limited to, our ability to consummate acquisitions and other partnering relationships at reasonable valuations; our ability to integrate recent and pending acquisitions and partnering relationships within the expected timeframes and to achieve the revenue, earnings and cost savings levels from such acquisitions and relationships at or above the levels projected; changes in governmental reimbursement rates and other regulations or policies affecting the services provided by us to clients and/or patients; the operational, administrative and financial effect of our compliance with other governmental regulations and applicable licensing and certification requirements; our ability to attract new client relationships or to retain and grow existing client relationships through expansion of our hospital rehabilitation and contract therapy service offerings and the development of alternative product offerings; the future financial results of our unconsolidated affiliates; the adequacy and effectiveness of our operating and administrative systems; our ability to attract and the additional costs of attracting and retaining administrative, operational and professional employees; shortages of qualified therapists and other healthcare personnel; significant increases in health, workers compensation and professional and general liability costs; litigation risks of our past and future business, including our ability to predict the ultimate costs and liabilities or the disruption of our operations; competitive and regulatory effects on pricing and margins; our ability to effectively respond to fluctuations in our census levels and number of patient visits; the proper functioning of our information systems; natural disasters and other unexpected events which could severely damage or interrupt our systems and operations; and general and economic conditions, including efforts by governmental reimbursement programs, insurers, healthcare providers and others to contain healthcare costs.

About RehabCare

RehabCare, headquartered in St. Louis, MO, is a leading provider of physical rehabilitation management services for hospital inpatient rehabilitation and skilled nursing units, outpatient programs and contract therapy services in conjunction with more than 900 hospitals and skilled nursing facilities in 39 states, the District of Columbia and Puerto Rico. RehabCare also operates three freestanding rehabilitation hospitals and two long-term acute care hospitals. RehabCare is pleased to be included in the Russell 2000 and Standard and Poor's Small Cap 600 indices.

About Symphony Health Services

Symphony Health Services, headquartered in Hunt Valley, MD, offers a comprehensive array of rehabilitation, ancillary, nursing and consulting services available to the healthcare continuum. These services include contract physical, occupational and speech therapy, home care, contract nursing, and operational and financial consultation. With more than 5,000 full and part-time employees, the Symphony Health Services' family of companies includes RehabWorks, VTA Management Services, and Polaris Group, providing services to over 1,100 customers in 43 states.

Source: Business Wire

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