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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
November 4, 1997
Date of report (Date of earliest event reported)
PARAGON HEALTH NETWORK, INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 001-10968 74-2012902
(State or other (Commission (IRS Employer
Jurisdiction of File Number) Identification No.)
Incorporation)
One Ravinia Drive, Suite 1500
Atlanta, Georgia
(Address Of Principal Executive Offices)
30346
(Zip Code)
Registrant's telephone number, including area code: (770) 393-0199
Living Centers of America, Inc.
15415 Katy Freeway, Suite 800
Houston, Texas 77094
(Former Name or Former Address, if Changed Since Last Report)
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Item 1. Changes in Control of Registrant
On November 4, 1997, Living Centers of America, Inc., a Delaware
corporation ("LCA"), GranCare, Inc., a Delaware corporation ("GranCare") and
Apollo Management, L.P. ("Apollo") and certain other investors (collectively
with Apollo, the "Apollo Group"), engaged in a series of transactions pursuant
to which Paragon Health Network, Inc., a Delaware corporation ("Paragon") was
formed. Paragon was formed as a result of the following transactions: (1)
Apollo formed a wholly owned subsidiary, Apollo LCA Acquisition Corp. ("Apollo
Sub"), capitalized with approximately $240 million in cash contributed by the
Apollo Group (the "Apollo Equity Commitment"); (2) Apollo Sub was merged with
and into LCA with LCA being the surviving corporation (the "Recapitalization
Merger") pursuant to which (x) LCA changed its name to Paragon; (y) all of the
issued and outstanding common stock of Apollo Sub was converted, on a one for
one basis, into shares of common stock, par value $0.01 per share, of Paragon
("Paragon Common Stock"); and (z) on an aggregate basis, the ownership interests
or holders of all of the issued and outstanding common stock of LCA were
converted into the right to receive, subject to election and proration
procedures, $40.50 per share of LCA common stock in cash (with respect to
90.54% of the issued and outstanding shares of LCA common stock) and shares of
Paragon Common Stock, on a one for one basis (with respect to 9.46% of the
issued and outstanding shares of LCA common stock); and (3) immediately
following the Recapitalization Merger, GranCare was merged with a wholly-owned
subsidiary of Paragon (the "GranCare Merger," and collectively with the
Recapitalization Merger, the "Mergers") with GranCare being the surviving
corporation pursuant to which each issued and outstanding share of GranCare
common stock was converted into the right to receive 0.2346 of a share of
Paragon Common Stock. Immediately following the Mergers, the Apollo Group owned
approximately 44%, former GranCare stockholders owned approximately 41.9% and
LCA stockholders retained approximately 14.1% of the issued and outstanding
shares of Paragon Common Stock.
The funds used to pay the costs of the Mergers, refinance certain LCA and
GranCare indebtedness and to pay fees and expenses incident to the Mergers and
related transactions were obtained from (i) the Apollo Equity Commitment, (ii)
the private offering of $569 million aggregate principal amount of Senior
Subordinated Notes and Senior Subordinated Discount Notes (in connection with
which Chase Securities Inc., Smith Barney Inc. and Credit Suisse First Boston
Corporation acted as the initial purchasers) and (iii) $740 million in term
loans under a new senior credit facility with a syndicate of banks with The
Chase Manhattan Bank serving as lead bank.
In connection with the consummation of the Mergers, Apollo, LCA and
GranCare agreed that the initial Board of Directors of Paragon would consist of
11 members, one of whom would be Keith B. Pitts (the Chairman, Chief Executive
Officer and President of Paragon), six of whom would be designees of Apollo,
three of whom would be designees of GranCare and one of whom would be a designee
of LCA. Following the Mergers, the Apollo Group and Paragon entered into a
Stockholders Agreement dated November 4, 1997 (the "Stockholders Agreement")
governing the nomination of members to the Board of Directors of Paragon on a
going forward basis and certain other matters.
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The descriptions of the Mergers, the related financing transactions, the
Stockholders Agreement and certain other related transactions are incorporated
herein by reference from the Registrant's Registration Statement on Form S-4, as
amended, (Registration No. 333-36525), filed with the Securities and Exchange
Commission on September 26, 1997 (the "Registration Statement on Form S-4").
Item 2. Acquisition or Disposition of Assets.
See response to Item 1 above.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
The information required by this item is incorporated by reference from the
Registrant's Registration Statement of Form S-4.
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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, hereunto duly authorized.
PARAGON HEALTH NETWORK, INC.
By: /s/ Stefano M. Miele
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Stefano M. Miele
Vice President and Assistant General Counsel
Dated: November 11, 1997
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EXHIBIT INDEX
Sequential
Exhibit No. Page No.
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99.1 Press Release dated November 4, 1997, announcing
the effectiveness of the Mergers
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Exhibit 99.1
FOR IMMEDIATE RELEASE
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Contacts:
Living Centers of America, Inc. GranCare, Inc.
Boyd Gentry Chris Snow
Vice President Investor Relations & Treasurer Investor Relations
(281)578-4650 (770)393-0199
Living Centers of America and GranCare
Announce Completion of Merger Transactions
Houston and Atlanta - November 4, 1997 -- Living Centers of America,
Inc. (NYSE: LCA) and GranCare, Inc. (NYSE: GC) announced today the completion of
the recapitalization and merger transactions described in the combined press
releases dated May 8 and September 15, 1997. The merged company, Paragon Health
Network, Inc. ("Paragon"), through its subsidiaries, is one of the largest and
most diversified providers of long-term and specialty health care services in
the United States, with pro forma revenues of approximately $1.9 billion.
Paragon's subsidiaries include one of the nation's largest post acute
operators; American Pharmaceutical Services, which is one of the country's
largest institutional pharmacies serving more than 100,000 beds; American
Rehability Services, a significant national provider of contract therapy and an
operator of rehabilitation outpatient clinics; Cornerstone Health Management, a
contract manager for geriatric programs in acute care hospitals; and businesses
providing a full complement of home health and ancillary services oriented
toward America's senior citizens. In select markets, Paragon will integrate all
of the foregoing health care services with its long-term care facilities to
provide a full continuum of post acute care.
Apollo Management, L.P. has invested $240 million in the
recapitalization, giving them an approximate 44% equity ownership in Paragon.
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Former Living Centers shareholders will retain an approximate 14.1% ownership,
former GranCare shareholders will own approximately 41.9% of the Paragon shares
outstanding.
Keith B. Pitts, Paragon's chairman of the board, president and chief
executive officer, stated, "The formation of Paragon Health Network through the
merger of two leading providers of long-term care and specialty medical services
in the U.S. offers a tremendous foundation on which to build. We look forward to
expanding the breadth and depth of quality health care services offered to our
residents, patients and customers through our networks of facilities and
services."
The common stock of both Living Centers of America, Inc. and GranCare,
Inc. ceased trading on the New York Stock Exchange as of the close of business
on November 4, 1997. Paragon's common stock will begin trading on the New York
Stock Exchange under the ticker symbol "PGN" as of the opening of business on
November 5, 1997.
Paragon Health Network, Inc., headquartered in Atlanta, is a diversified
health care company providing, through its subsidiaries, an array of long-term
and specialty healthcare services. The company has four operating divisions:
post acute services (328 skilled nursing and assisted living facilities with
more than 38,000 beds and 41 home health branches), pharmaceutical services (34
institutional pharmacies serving more than 100,000 beds), rehabilitation
services (contract therapy and outpatient therapy clinics), and hospital
services (more than 180 acute care hospital program contracts).
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