HEALTH CARE & RETIREMENT CORP / DE
8-K, 1998-06-16
SKILLED NURSING CARE FACILITIES
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                      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

                    HEALTH CARE AND RETIREMENT CORPORATION
              (Exact name of registrant as specified in charter)



Delaware                               0-10858               34-1687107
(State or other Jurisdiction           (Commission           (I.R.S. Employer
of Incorporation)                      File Number)          Identification No.)

One SeaGate                                                  43604-2616
Toledo, Ohio                                                 (Zip Code)
(Address of Principal
Executive Offices)




Registrant's telephone number, including area code: (419) 252-5500


<PAGE>   2

Item 5.  Other Events.

         Manor Care, Inc., a Delaware corporation ("Manor Care"), Health Care
and Retirement Corporation ("HCR") and Catera Acquisition Corporation, a
Delaware corporation ("Merger Sub"), have signed an Agreement and Plan of
Merger dated as of June 10, 1998 (the "Merger Agreement") which provides for
the merger of Merger Sub with and into Manor Care, whereby the separate
corporate existence of Merger Sub will cease and Manor Care will continue as a
wholly owned subsidiary of HCR (the "Merger"). Following the Merger, HCR will
be renamed HCR Manor Care for a period of one year and, thereafter, Manor Care
unless such name is changed by a resolution of its Board of Directors.

         The Merger Agreement provides that, with certain limited exceptions,
the owner of each issued and outstanding share of Manor Care common stock, par
value $.10 per share shall be converted into the right to receive one (1.0)
share of HCR common stock, par value $ .01 per share. Upon completion of the
transaction, Manor Care will be a wholly owned subsidiary of HCR and the
stockholders of Manor Care will become stockholders of HCR.

         The merger is subject to certain conditions, including the approval of
HCR's shareholders at a special meeting to be held as soon as practicable, the
receipt of certain regulatory approvals and the expiration of antitrust
regulatory waiting periods.

         In connection with the execution and delivery of the Merger Agreement
and the transactions contemplated thereby, the Board of Directors of HCR
authorized the execution and delivery of an amendment, dated as of June 10,
1998, to HCR's Rights Agreement dated as of May 2, 1995, as amended, which is
filed herewith as Exhibit 4.3.

         HCR has issued a press release announcing the execution of the Merger
Agreement, which is filed herewith as Exhibit 99.1.


<PAGE>   3



Item 7.    Financial Statements and Exhibits.

     (c)   The following exhibits are filed with this report:

           4.3 Rights Amendment dated as of June 10, 1998 between Health Care
and Retirement Corporation and Harris Trust and Savings Bank

           99.1 Press Release dated June 10, 1998




<PAGE>   4

                                  SIGNATURES


        Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.



                                      HEALTH CARE AND RETIREMENT
                                      CORPORATION


Date: June 16, 1998                   By:  /s/ R. Jeffrey Bixler
                                           ---------------------
                                           Vice President, General Counsel





<PAGE>   1
                                                                     Exhibit 4.3


                    HEALTH CARE AND RETIREMENT CORPORATION
                               RIGHTS AMENDMENT

        AMENDMENT, dated as of June 10, 1998 (this "Amendment"), to the Rights
Agreement, dated as of May 2, 1995 (the "Rights Agreement"), between HEALTH
CARE AND RETIREMENT CORPORATION, a Delaware corporation (the "Company"), and
HARRIS TRUST AND SAVINGS BANK (the "Rights Agent").

        The Company and the Rights Agent have heretofore executed and entered
into the Rights Agreement. Pursuant to Section 26 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 26 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:

        I. The first sentence of Section 1.1 of the Rights Agreement is hereby
modified and amended to read in its entirety as follows:

             "Acquiring Person" shall mean any Person (as such term is 
        hereinafter defined) who or which, together with all Affiliates and     
        Associates (as such terms are hereinafter defined) of such Person,
        shall be the Beneficial Owner (as such term is hereinafter defined) of
        15% or more of the Common Shares of the Company then outstanding, but
        shall not include (i) the Company, (ii) any Subsidiary (as such term is
        hereinafter defined) of the Company, (iii) any employee benefit plan of
        the Company or any Subsidiary of the Company or any entity holding
        Common Shares for or pursuant to the terms of any such plan, (iv)
        Stewart Bainum or his spouse or widow, their lineal descendants or
        their spouses or widows or widowers (for so long as they remain
        spouses) (each a "Member of the Bainum Family"), or the estate of any
        of the foregoing persons (but only until such time as the Common Shares
        are distributed therefrom), (v) any partnership, trust, corporation or
        other entity (each, an "Entity"), but only if a Member or Members of
        the Bainum Family or another Entity satisfying the requirements hereof
        are the sole Beneficial Owners of the Common Shares held by such
        Entity, other than any officer, trustee, director, or other managing
        person or managing partner or managing member of any such Entity to the
        extent any such person is deemed to be the Beneficial Owner of Common
        Shares held by such Entity, provided such person is not the Beneficial
        Owner, other than through an Entity



<PAGE>   2


        described in this clause (v), of in excess of 1% of the total 
        outstanding Common Shares; or (vi) any transferee of a person described
        in clause (iv) or (v) so long as such transferee will not, after giving
        effect to such transfer, be the Beneficial Owner of more than 20% of
        the Common Shares of the Company; provided, however, that no Member of
        the Bainum Family will be excepted from this definition of "Acquiring
        Person" in the event that any such Member of the Bainum Family or any
        such estate or Entity, or all of them in the aggregate (A) prior to the
        Effective Time of the "Merger" (as defined in the Agreement and Plan of
        Merger, dated as of June 10, 1998, among the Company, Catera
        Acquisition Corp. and Manor Care, Inc. (the "Merger Agreement"),
        becomes the Beneficial Owner of Common Shares of the Company other than
        pursuant to the terms of the HCR Stock Option and (B) after the
        Effective Time, becomes the Beneficial Owner of 20.0% or more of the
        Common Shares of the Company other than pursuant to an excepted
        transaction described in the next sentence."

        I. Section 3.1 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 the Ancillary Agreements (as defined in the Merger
        Agreement), or (ii) the consummation of the Merger (as defined in the
        Merger Agreement) or the other transactions contemplated thereby or the
        exercise of the HCR Option (as defined in the Merger Agreement)."

        3. Section 13.1 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 13.1 shall not be   
        deemed to have occurred solely as a result of (i) the approval,
        execution and delivery of the Merger Agreement or the Ancillary
        Agreements (as defined in the Merger Agreement), or (ii) the
        consummation of the Merger (as defined in the Merger Agreement) or the
        other transactions contemplated thereby or the exercise of the HCR
        Option (as defined in the Merger Agreement)."

        4. Each of Section 7.1 or 13.2 of the Rights Agreement is hereby
amended by adding the following proviso: "; provided, however, none of the
Merger, the Merger Agreement, the Ancillary Agreements or the transaction
contemplated by any of such agreements shall be subject to this Section.

        5. Except as expressly amended hereby, the Rights Agreement remains in
full force and effect in accordance with its terms.



<PAGE>   3


        6. The Rights Agreement, as amended by this Amendment, and each Right
and each Rights Certificate exist under and pursuant to the Delaware General
Corporation Law.

        7. This Amendment to the Rights Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.

        8. 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.

        9. 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.






<PAGE>   4


        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.


                                                HEALTH CARE AND RETIREMENT
                                                CORPORATION


                                                By: 
                                                   ----------------------------
                                                     Title:


                                                HARRIS TRUST AND SAVINGS BANK

                                                By: 
                                                   ----------------------------
                                                     Title:





<PAGE>   1

                                                                    Exhibit 99.1

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, Ohio and GAITHERSBURG, Md., June 10 /PRNewswire/ -- Health Care and
Retirement Corporation (NYSE: HCR - news) and Manor Care Inc. (NYSE: MNR -
news) 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 taxfree 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 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.



<PAGE>   2

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."

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 - news) and holds a controlling interest in In-Home
Health, Inc. (Nasdaq: IHHI - news).

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



<PAGE>   3

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.

                          HCR MANOR CARE FACT SHEET

<TABLE>
<CAPTION>
                                                  HCR       Manor Care       Combined
<S>                                               <C>       <C>              <C>
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(l)                                     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) Michgan

Quality Mix(2)
Private/owner                                      44%          56%              51%
Medicare                                           26%          18%              21%
Medicaid                                           30%          26%              28%
Occupancy                                          89%          88%              89%
</TABLE>

(1) Includes Manor Care's equity interest in In Home Health.
(2) Excludes Hospital for Manor Care.


                           HCR MANOR CARE FACT SHEET
                 (Dollars in millions, except otherwise noted)

<TABLE>
<CAPTION>
                                                            LTM(3)
                                                 HCR      Manor Care        Combined
<S>                                              <C>        <C>              <C>
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
</TABLE>



<PAGE>   4


<TABLE>
<S>                               <C>          <C>         <C>
Shares outstanding(MM)            44.8         63.7        108.5
Debt/Capitalization                40%          37%          38%
Debt/EBITDA                       1.9x         2.1x         2.0x
</TABLE>



(3)  Based on HCR and Manor Care's 10-K and 10-Q SEC Filings. Manor Care results
     adjusted for Vitalink transaction.


SOURCE: Health Care and Retirement Corporation








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