SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 10, 1998
MANOR CARE, INC.
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(Exact name of registrant as specified in its charter)
Delaware 1-8195 52-1200376
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(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
11555 Darnestown Road
Gaithersburg, Maryland 20878
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (301) 979-4000
None
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(Former name or former address, if changed since last report.)
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Item 5. Other Events.
On June 10, 1998, the registrant, Health Care and Retirement Corporation, a
Delaware corporation ("HCR"), and Catera Acquisition Corp., a Delaware
corporation and wholly owned subsidiary of HCR ("Merger Sub"), entered into an
Agreement and Plan of Merger (the "Merger Agreement") dated as of June 10, 1998,
pursuant to which Merger Sub would merge (the "Merger") with and into the
registrant and the separate corporate existence of Merger Sub will cease and the
registrant will continue as the surviving corporation. The Merger Agreement
provides that, with certain limited exceptions, each outstanding share of the
registrant's common stock, par value $.10 per share, shall be converted into the
right to receive one share of common stock of HCR, par value $.01 per share.
Upon completion of the transaction, the registrant will become a wholly owned
subsidiary of HCR and the stockholders of the registrant will become
stockholders of HCR. The consummation of the transactions contemplated by the
Merger Agreement are subject to the approval of the stockholders of each of the
registrant and HCR, the receipt of certain regulatory approvals and the
expiration of antitrust waiting periods. For additional information regarding
the transactions contemplated by the Merger Agreement, reference is made to a
press release announcing the execution of the Merger Agreement, a copy of which
is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
On June 10, 1998, the registrant amended the Rights Agreement (the "Rights
Agreement") between the registrant and ChaseMellon Shareholder Services, L.L.C.,
dated as of February 25, 1998 (the "Rights Amendment"). The Rights Amendment
excludes HCR from being an "Acquiring Person" within the meaning of the Rights
Agreement and adds certain statements clarifying that the Merger would not
trigger provisions of the Rights Agreement. Reference is made to the Rights
Amendment, a copy of which is attached hereto as Exhibit 4.2 and is incorporated
herein by reference.
Item 7. Financial Statements and Exhibits.
(c) Exhibits. The following exhibits are filed herewith and incorporated
herein by reference:
Exhibit No. Description
4.2 Amendment to Rights Agreement between Manor Care, Inc. and
ChaseMellon Shareholder Services, L.L.C., as Rights Agent,
dated June 10, 1998
99.1 Press Release dated June 10, 1998
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MANOR CARE, INC.
Date: June 16, 1998 By: /s/ James H. Rempe
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Name: James H. Rempe
Title: Senior Vice President
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EXHIBIT INDEX
Number Description
4.2 Amendment to Rights Agreement between Manor Care, Inc.
and ChaseMellon Shareholder Services, L.L.C., as Rights
Agent, dated June 10, 1998
99.1 Press Release dated June 10, 1998
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EXHIBIT 4.2
MANOR CARE, INC.
RIGHTS AGREEMENT AMENDMENT
AMENDMENT, dated as of June 10, 1998 (this "Amendment"), to the Rights
Agreement, dated as of February 25, 1998 (the "Rights Agreement"), between Manor
Care, Inc., a Delaware corporation (the "Company"), and ChaseMellon Shareholder
Services, L.L.C. (the "Rights Agent").
The Company and the Rights Agent have heretofore executed and entered into
the Rights Agreement. Pursuant to Section 28 of the Rights Agreement, the
Company and the Rights Agent may from time to time supplement or amend the
Rights Agreement in accordance with the provisions of Section 28 thereof. All
acts and things necessary to make this Amendment a valid agreement according to
its terms have been done and performed, and the execution and delivery of this
Agreement by the Company and the Rights Agent have been in all respects
authorized by the Company and the Rights Agent.
In consideration of the foregoing premises and mutual agreements set forth
in the Rights Agreement and this Amendment, the parties hereto agree as follows:
1. The first sentence of the definition of an "Acquiring Person" in Section
l (a) of the Rights Agreement is hereby modified and amended to add a clause
(vi) thereto to read in its entirety as follows:
"and (vi) until the termination of the Agreement and Plan of Merger
dated as of June 10, 1998 (the "Merger Agreement") by and among the
Company, Health Care and Retirement Corporation ("HCR"), a Delaware
corporation, and Catera Acquisition Corporation, a Delaware corporation
and a wholly owned subsidiary of HCR ("Catera Acquisition
Corporation"), HCR or Catera Acquisition Corporation."
2. Section 3 of the Rights Agreement is hereby amended by adding as the
final sentence thereto the following:
"Notwithstanding anything in this Agreement to the contrary, a
Distribution Date shall not be deemed to have occurred solely as a
result of (i) the approval, execution and delivery of the Merger
Agreement or (ii) the consummation of the Merger (as defined in the
Merger Agreement)."
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3. Section 14 of the Rights Agreement is hereby amended by adding as the
final sentence thereto the following:
"Notwithstanding anything in this Agreement to the contrary, a
transaction of the kind referred to in this Section 14 shall not be
deemed to have occurred solely as a result of (i) the approval,
execution and delivery of the Merger Agreement or (ii) the consummation
of the Merger."
4. Except as expressly amended hereby, the Rights Agreement remains in full
force and effect in accordance with its terms.
5. The Rights Agreement, as amended by this Amendment, and each Right and
each Right Certificate exist under and pursuant to the Delaware General
Corporation Law.
6. This Amendment to the Rights Agreement shall be deemed to be a contract
made under the laws of the State of Delaware and for all purposes shall be
governed by and construed in accordance with the laws of such State applicable
to contracts to be made and performed entirely within such State except that the
rights, duties and obligations of the Rights Agent under this Agreement shall be
governed by the laws of the State of New York.
7. This Amendment to the Rights Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed an
original, and all such counterparts shall together constitute but one and the
same instrument.
8. Except as expressly set forth herein, this Amendment to the Rights
Agreement shall not by implication or otherwise alter, modify, amend or in any
way affect any of the terms, conditions, obligations, covenants or agreements
contained in the Rights Agreement, all of which are ratified and affirmed in all
respects and shall continue in full force and effect.
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IN WITNESS WHEREOF, the parties hereto have caused this Amendment to the
Rights Agreement to be duly executed as of the day and year first above written.
Attest: MANOR CARE, INC.
By: /s/ Leigh C. Comas By: /s/ James H. Rempe
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Title: Vice President - Title: Senior Vice President
Finance and Treasurer
Attest: CHASEMELLON SHAREHOLDER
SERVICES, L.L.C.
By: /s/ Stanley E. Siekieski By: /s/ Beverly A. Varrico
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Title: Vice President Title: Assistant Vice President
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EXHIBIT 99.1
Contacts: Geoffrey G. Meyers Leigh C. Comas David Kronfeld
HCR Manor Care Eric Berman
419-252-5545 301-979-4168 Caroline Gentile
Kekst and Company
212-521-4800
For Immediate Release
HEALTH CARE AND RETIREMENT CORPORATION AND MANOR CARE
TO COMBINE IN $5 BILLION MERGER TO CREATE NATION'S LEADING
LONG-TERM HEALTH CARE SERVICES COMPANY
-- Combination of Two Premier Companies to Result in
Enhanced Growth Prospects and Profitability --
-- New Company to Have Exceptional Financial and Geographic Strength --
TOLEDO, OH. AND GAITHERSBURG, MD, June 10, 1998 - Health Care and
Retirement Corporation (NYSE:HCR) and Manor Care Inc. (NYSE:MNR) today jointly
announced a definitive agreement to merge the two companies in an exchange of
shares, in a transaction valued at approximately $5 billion, including the
assumption of debt. The combined company, which will be known as HCR Manor Care,
will unite two of the nation's leaders in the long-term health care services
industry. It will create the largest and most profitable company in its
industry, exceptionally well positioned to capitalize on new growth
opportunities.
Under the terms of the agreement, each share of Manor Care will be
exchanged for one share of HCR. The transaction is expected to be immediately
accretive to HCR's earnings and to be tax-free to Manor Care's shareholders. It
will be accounted for as a pooling of interests.
The transaction has been approved by the Boards of Directors of both
companies, and requires the approval of the shareholders of both companies, as
well as customary regulatory approval. The Bainum family, which holds
approximately 31% of the shares
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of Manor Care, has agreed to vote its shares in favor of the transaction. The
transaction is expected to be completed during the fourth quarter.
Headquarters of HCR Manor Care will be located in Toledo, Ohio. The Board
of Directors of the combined company will have equal representation from both
HCR and Manor Care. Stewart Bainum, Jr., Chairman and Chief Executive Officer of
Manor Care, will become Chairman of the combined company, and Paul A. Ormond,
Chairman, President and Chief Executive Officer of HCR, will be President and
Chief Executive Officer. Additionally, M. Keith Weikel, Senior Executive Vice
President and Chief Operating Officer of HCR, and Geoffrey G. Meyers, Executive
Vice President and Chief Financial Officer of HCR, will maintain their
respective positions after the combination. Joseph R. Buckley, Executive Vice
President of Manor Care, will continue as Executive Vice President in the
combined company.
As a result of the combination, the planned separation of Manor Care, Inc.
into a health care services management company and a health care real estate and
development company will be canceled.
Mr. Ormond said, "The combination of these two preeminent long-term care
providers will create an important new force in the industry, with increased
growth potential from an already rapidly growing base. The combination of our
two companies will enhance our ability to offer superior and innovative patient
services at a time when the long-term care industry is both growing and
consolidating."
Mr. Bainum said, "The merger of HCR and Manor Care brings together two
companies with similar philosophies and characteristics. I am pleased that we
will be gaining the additional talents of the HCR management team, which has
achieved such an outstanding record of success and in which I have full
confidence. By combining, we will be able to make optimal use of our top-quality
assets, and continue to attract the best people in the industry. Together, we
will be the premier long-term care company in the United States in terms of
facilities and capabilities, as well as the most profitable and the largest in
terms of market capitalization."
"By combining our strong financial positions, we will create a company with
a very solid balance sheet and an equity market capitalization of approximately
$4 billion, less than $1 billion of debt, and total revenues of $2.4 billion.
This financial strength will enable us to take advantage of greater expansion
opportunities, both through an aggressive internal facilities development
program and through future acquisitions, at the lowest cost of capital in the
industry."
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Mr. Ormond stated, "Moreover, the merger will combine the best practices of
the best companies in the industry. HCR will bring its proven record for
generating consistent revenue and earnings growth, which has exceeded 20% in
each year since going public in 1991, and its strong operating expertise. Manor
Care will bring its top-notch facilities and its reputation for high-quality,
innovative services, including its rapidly growing Arden Court assisted living
facilities which specialize in the care of individuals with Alzheimer's
disease."
"Together, we will have a large percentage of high-quality revenues and a
strong geographic presence, especially in several states with particularly
attractive market dynamics, such as Ohio, Pennsylvania, Michigan, Illinois and
Florida. The combination will also improve our ability to negotiate effectively
with managed care providers," Mr. Ormond concluded.
Within the first full year of operations, the combined company expects to
realize at least $30 million of cost savings in addition to the earnings
enhancements generated by the combination.
In total, HCR has 124 long term care centers, 76 outpatient therapy
clinics, 116 subacute and rehabilitation units, 5 assisted living centers, 33
home health offices, and a national pharmacy with 4 locations. Manor Care
operates 171 skilled nursing and rehabilitation facilities, 42 assisted living
centers and one acute care hospital.
Manor Care currently operates 213 health care facilities containing 28,300
beds in 29 states. Manor Care also owns approximately 50% of Vitalink Pharmacy
Services (NYSE:VTK) and holds a controlling interest in In-Home Health, Inc.
(NASDAQ:IHHI).
HCR, headquartered in Toledo, Ohio, now has more than 22,000 employees
providing high-quality care through a network of long-term care centers,
outpatient rehabilitation clinics, home health care offices, and management
service for professional organizations. In 1997, HCR reported revenues of $892
million.
Chase Securities acted as financial advisor to HCR and SBC Warburg Dillon
Read was financial advisor to Manor Care.
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HCR MANOR CARE FACT SHEET
HCR Manor Care Combined
Facilities:
LTC 124 171 295
Outpatient Therapy Clinics 76 - 76
Subacute/Rehab 116 - 116
Assisted Living 5 42 47
Acute Care Hospital - 1 1
Home Health(1) 33 1 34
National Pharmacy 4 - 4
States Covered 16 29 32
Top Five States 1) Ohio 1) Pennsylvania 1) Pennsylvania
2) Florida 2) Illinois 2) Ohio
3)Michigan 3) Florida 3) Florida
4) Texas 4) Ohio 4) Illinois
5) Pennsylvania 5) Maryland 5) Michigan
Quality Mix(2)
Private/owner 44% 56% 51%
Medicare 26% 18% 21%
Medicaid 30% 26% 28%
Occupancy 89% 88% 89%
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1 Includes Manor Care's equity interest in In Home Health.
2 Excludes Hospital for Manor Care.
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HCR MANOR CARE FACT SHEET
(Dollars in millions, except otherwise noted)
LTM(3)
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HCR Manor Care Combined
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Revenue $905 $1,355 $2,260
EBITDA 156 223 379
EBIT 118 145 263
Net Income 73 100 173
Cash $3 $45 $48
Total Assets 949 1,793 2,742
Total Debt 293 478 771
Total Equity 446 816 1,262
Shares Outstanding (MM) 44.8 63.7 108.5
Debt/Capitalization 40% 37% 38%
Debt/EBITDA 1.9x 2.1x 2.0x
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3 Based on HCR and Manor Care's 10K and 10Q SEC Filings. Manor Care results
adjusted for Vitalink transaction.
