Healthcare (GTIV)

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Gentiva Health Services jumps on CareCentrix sale
Gentiva Health Services climbs after company sells it will sell remaining stake in CareCentrix

On Monday August 29, 2011, 2:37 pm EDT

NEW YORK (AP) -- Shares of Gentiva Health Services Inc. jumped Monday after the home health services company said it will sell the rest of its stake in CareCentrix, which manages home health services for health insurers.

THE SPARK: The Atlanta company said late Friday it expects to get $65 million to $70 million for its stake in CareCentrix Holdings Inc. Gentiva will to hold a $25 million note receivable which bears interest at an annual rate of 10 percent. The company said it expects the sale to close in the next few weeks.

THE BIG PICTURE: Gentiva has been gradually selling off its stake in CareCentrix. In August 2008, Gentiva agreed to sell a 69-repcent stake in CareCentrix to a private equity firm for $147 million. It had a 30 percent stake in the company at the start of 2011, which it had reduced to 22 percent as of June 30.

THE ANALYSIS: Raymond James analyst John Ransom said the sale is good news for Gentiva, but in his opinion, the company is still likely to default on its debt covenants in the fourth quarter of 2012. Ransom wrote that it is also not clear what will happen to Medicare payment rates in 2013 and after, so Gentiva's shares will remain under pressure. However, he said the stock has been weak recently compared to its peers.

SHARE ACTION: Gentiva shares rose $1.03, or 14 percent, to $8.32 in afternoon trading. The stock has traded between $6.09 and $29.21 in the last 12 months.