Formation Capital got plenty of ink

COMPANY DID NOT RE-BID IN QUEST TO ACQUIRE BEVERLY ENTERPRISES

Formation Capital LLC of Alpharetta, Ga., is certainly well-known in the senior healthcare industry. The company, however, might be best known for – or at least received the most press for — a deal that got away.

In January 2005, Formation Capital, with backing from Appaloosa Management LP and Franklin Mutual Advisers LLC, made an offer of $1.24 billion to acquire Fort Smith, Ark.-based Beverly Enterprises Inc., the country’s largest nursing home operator.

Beverly, which owned 345 nursing homes, 18 assisted living centers and 64 hospice centers at the time, rejected the deal, saying the bid was too low.

Beverly then hired New York-based Lehman Brothers to begin an auction process. After five months on the auction block and following several more bids by Formation Capital, Beverly agreed in late August 2005 to be acquired by North American Senior Care Inc., which was created to acquire Beverly, for $12.80 a share – for a total of almost $2 billion. The day after the agreement was announced, Formation made another bid at $12.90 per share.

Beverly, however, continued the process of selling to North American Senior Care. The deal, however, fell through, as North American Senior Care could not come up with the financing to make the acquisition.

Then, in late November 2005 Beverly announced that it had reached an agreement to be acquired by Fillmore Strategic Investors LLC for $12.50 a share – some 40 cents per share less than Formation Capital’s highest offer.

The sale was completed March 15, 2006. It is not known why Formation Capital did not re-bid when North American Senior Care’s financing fell through.