A Medical Device Daily

RehabCare Group, (St. Louis) said it has entered into a definitive merger agreement with Triumph HealthCare (Houston), a developer and operator of long-term acute care hospitals (LTACHs) in the U.S., for a purchase price of $570 million, subject to adjustment.

Triumph's trailing 12-month revenues through September 30, 2009 were $439.7 million and adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $89.7 million. The purchase price is nearly 6.2 times the trailing 12-month adjusted EBITDA. The transaction is expected to close on or about Dec. 1, 2009, pending customary closing conditions, including regulatory approvals.

The combined organization will represent the fourth largest post-acute hospital operator and the third largest LTACH provider in the country, with 29 LTACHs and six inpatient rehabilitation facilities (IRFs) operating in 13 states, including two LTACHs that will be added in the first half of 2010.

RehabCare expects the merger to be meaningfully accretive to diluted earnings per share attributable to RehabCare in 2010, including expected synergies. In the fourth quarter of 2009, the company expects to incur one-time expenses related to closing the transaction of approximately $9 million to $10 million on a pre-tax basis. The combined organization is expected to more than double the company's cash flow from operations.

The transaction will be financed through a combination of committed bank financing, equity and/or seller financing in the form of convertible preferred stock of RehabCare and cash on hand.