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CAHF CEO Conference. May 31, 2012. Today’s Agenda. Genesis HealthCare Overview “Go Private” Transaction Overview OPCO/PROPCO – REIT Transaction Questions and Answers. Genesis HealthCare Overview. Genesis HealthCare (Skilled Nursing & Assisted Living).

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cahf ceo conference

CAHF CEO Conference

May 31, 2012

slide2

Today’s Agenda

  • Genesis HealthCare Overview
  • “Go Private” Transaction Overview
  • OPCO/PROPCO – REIT Transaction
  • Questions and Answers
slide3

Genesis HealthCare Overview

Genesis HealthCare (Skilled Nursing & Assisted Living)

Genesis HealthCare is one of the nation’s largest long-term care providers.

  • Genesis operates more than 200 skilled nursing and assisted living facilities in 13 states along the east coast
  • Focused on higher acuity & medically complex patients
  • A team of 10,000 Genesis Rehabilitation therapists provide rehabilitation and respiratory therapy services in more than 1,100 sites (including Genesis).

3

history
History

Growth Phase:

  • 1985: Genesis Health Ventures formed & initiation of public co.
  • 1993 – 1998: Six Major acquisitions
  • 1998: Purchased Vitalink(now LTC and Pharmacy)
  • 1993 – 1998: Raised $2.0 Billion in Capital:
      • Bank Financing
      • Public Subordinated Debt
      • Convertible Debentures
      • Convertible Preferred Securities
      • Private Equity
      • Public Equity
history1
History

Bankruptcy Phase:

  • Balanced Budget Act of 1998 creates a quantum change in funding
    • > 70% of revenue came from federal and state gov’t
    • Government slashed reimbursement by 30%
    • 5 major long term care companies file for Bankruptcy
  • GHV files for bankruptcy in June 2000
history2
History

Restructuring Phase:

  • October 2001: GHV emerges from bankruptcy
  • 2001: Combined value is $1.5 Billion
  • 2003: Board decides that the LTC and pharmacy businesses should be separated; combined value only at $1.3 Billion
  • December 2003: Genesis HealthCare Corporation is spun-off from GHV
  • February 2004: Omnicare launches hostile takeover. Closes deal at $1.6 Billion
history3
History

Restructuring Phase:

  • Genesis HealthCare embarks on an integrated operational, financial and technical strategy. Focuses on internal modernization and select acquisitions.
  • EV at spin-off = $900 million; grows to $1.3 Billion
  • In June 2006, the company looks at strategic alternatives for creating value.
slide8

Today’s Agenda

  • Genesis HealthCare Overview
  • “Go Private” Transaction Overview
  • OPCO/PROPCO – REIT Transaction
  • Questions and Answers
go private transaction overview
“Go Private” Transaction Overview

Why should Genesis consider going private?

  • Market liquidity
  • Cost of being a public company
    • Sarbanes Oxley
    • Managing performance to quarterly expectations
  • Stable reimbursement environment
  • Hostile takeover environment
  • Needed to consider all constituents:
    • Patients and residents
    • Government regulators
    • Board of Directors
    • Employees
    • Shareholders
  • Board decides it is in the best interest of the company to go private. Final deal at $1.9 Billion (July 2007).
lessons learned
Lessons Learned
  • Consider impact on all constituents
  • Effective communication with Board
  • Know your shareholders
  • Understand market dynamics
  • Be prepared to lose control of the process
  • Execution and earnings growth in GHC
slide16

Today’s Agenda

  • Genesis HealthCare Overview
  • “Go Private” Transaction Overview
  • OPCO/PROPCO – REIT Transaction
  • Questions and Answers
opco propco reit transaction
OPCO/ PROPCO – REIT Transaction
  • Transaction Rationale
  • Company Performance
  • REIT Capital Markets Analysis
  • Transaction Preparation
reit transaction rationale
REIT Transaction Rationale
  • Strategic alignment with REIT partner
  • Maximize investor value
  • Access to capital
  • Support corporate growth
transaction preparation
Transaction Preparation
  • OPCO/PROPCO Split
    • Legal
    • Tax
    • Finance
    • Systems

* Don’t underestimate the magnitude of this process

  • Market timing
  • Execution
  • Post transaction capital needs
slide23

Today’s Agenda

  • Genesis HealthCare Overview
  • “Go Private” Transaction Overview
  • OPCO/PROPCO – REIT Transaction
  • Questions and Answers