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"Carlyle Group completes $6.3B takeover of Manor Care"

The Toledo Blade

By Larry P. Vellequette
Blade Business Writer

Toledo’s Manor Care Inc., one of the largest nursing home companies in the United States, was taken over yesterday by the Carlyle Group, a private–equity firm from Washington.

The $6.3 billion sale, first announced in July, was completed shortly after a Michigan Circuit Court judge yesterday morning dissolved a temporary restraining order issued the night before that temporarily froze the deal.

Manor Care Chief Executive Paul A. Ormond said in a statement: "We are pleased with this successful outcome. We look forward to working with Carlyle and continuing to provide quality care to our patients and residents."

The firm will be known as HCR ManorCare.

Its headquarters and the 700 employees there will remain in downtown Toledo, and the entire management staff will be retained, spokesman Rick Rump said yesterday.

"We’re here, the headquarters is here, and we’re committed to staying here in Toledo. There should be no changes," Mr. Rump said. "[Mr.] Ormond just put out a message to employees in a voice mail saying we’re committed to staying here in Toledo."

The deal eliminates the Toledo area’s fourth–largest company with public stock, as Carlyle has no stock.

The stock of Manor Care, traded on the New York Stock Exchange under the symbol HCR, ceased trading at the end of yesterday at a final price of $66.99. Investors, under the terms of the purchase, will receive $67 in cash for each share of common stock. Mr. Rump said he did not know how quickly those transactions would take place.

The company had profits of $167 million on $3.6 billion in revenues last year and was ranked 565th on Fortune magazine’s annual list of largest publicly traded companies.

It operates 550 nursing homes, assisted–living facilities, and other operations in 32 states. Most facilities are called Heartland, ManorCare Health Services, or Arden Courts. It has 60,000 workers.

The Carlyle Group is a global firm with $75 billion under management, owning firms with $87 billion in annual revenues and 286,000 employees. This is Carlyle’s first investment in nursing homes. It owns equity in companies in the health–care, automotive, defense, and other industries.

Toledo Mayor Carty Finkbeiner said of the transaction, "I’m delighted this is finally a done deal and that HCR ManorCare is at home in Ohio."

The deal, which was approved by Manor Care shareholders and regulatory agencies, is the largest price ever paid for a northwest Ohio firm, surpassing the $6.2 billion for Findlay’s Marathon Oil Corp. and the $3.6 billion Huntington Bancshares Inc. paid to acquire Bowling Green’s Sky Financial Group Inc. this year.

The local firm had been a profitable survivor in the nursing–home industry, with a strong revenue and stock performance while other operators nationally have gone bankrupt or been taken over recently.

The Toledo firm spun out of Owens–Illinois Inc., the giant glass container maker. It became Health Care & Retirement Corp. in 1991; in 1998, it merged with the Manor Care Inc. nursing–home chain in Gaithersburg, Md., in a $5 billion deal.

Clearing the way for the transaction yesterday was Judge William E. Collette, who ruled in favor of HCR ManorCare after a brief hearing in Ingham County Circuit Court in Lansing. The judge dissolved the court order issued upon the request of the Service Employees International Union Healthcare Michigan, which represents about 1,000 workers at some HCR ManorCare facilities.

SEIU attorneys argued that a thorough review of licenses for Manor Care’s 28 licensed Michigan facilities had not been undertaken by the state. A day earlier, the West Virginia Health Care Authority ruled against the union as it sought to delay the transaction in that state.

After the transaction closed, SEIU released a statement decrying the transaction and insisting that Carlyle assume responsibility for its new patients and employees.

"Carlyle has to take responsibility for what happens at Manor Care," said Stephen Lerner of the SEIU. "They must act now to fix Manor Care and protect its fragile residents."

HCR ManorCare and Carlyle officials repeatedly have said the facilities are well–staffed and the patients are taken care of. The union’s concerns, they said, didn’t arise until after the July announcement that Carlyle planned to acquire the local firm.

The company is negotiating with state and local officials for changes in the lease of its 16–story headquarters at 333 N. Summit St. Government officials said they expect an agreement to be reached.

Mr. Ormond and other top company executives were expected to profit through stock options from the sale to Carlyle. The CEO is expected to gross $118 million to $186 million personally from cashing in his company stock and exercising stock options.

Company officers, directors, key employees, and some retirees stand to collect about $200 million for their existing stock, and possibly more than $250 million if unexercised stock options can be cashed in, according to SEC filings this year.