After Delays, Carlyle Wins Manor Care

Monday, December 24, 2007

Just when it seemed Carlyle Group's attempt to buy Manor Care would stretch into the new year, the private-equity company announced Friday that it closed its $6.3 billion purchase of the nation's largest nursing home chain.

The hard-fought buyout was completed even with a credit market in turmoil, a tenacious and influential labor union opposing the deal, and concerns on Capitol Hill over private-equity firms purchasing nursing homes. To overcome worries about the deal's impact on quality of care, Carlyle offered repeated assurances that it would provide adequate staffing and resources to the chain.

Under the deal, Manor Care, which operates 500 nursing and assisted living facilities in 32 states, will be added to a wide-ranging Carlyle portfolio that includes Hertz rental cars and Dunkin' Donuts. In return, shareholders of Manor Care will receive $67 in cash for each share of stock.

Even down to the wire, the deal faced opposition. In West Virginia, where Manor Care operates some homes, health authorities imposed a stay that was delaying the transaction, but the order was lifted on Thursday. That same day, the Service International Employees Union got a circuit judge in Ingham County, Mich., to issue a temporary restraining order that would stall the transfer of licenses of the state's Manor Care facilities to Carlyle. Less than 24 hours later, Manor Care's lawyers got that temporary restraining order overturned and the licenses transferred -- the last piece of the puzzle needed to complete the deal.

"It was a last desperate attempt by the SEIU to subvert the regulatory process," said Rick Rump, assistant vice president of communications at Manor Care.

Manor Care said the takeover would not significantly change everyday operations at its facilities, despite a restructuring plan put in place by Carlyle that reorganizes some business lines. Top management will stay in place, including chief executive Paul A. Ormond, who will keep his seat on the top of the organizational chart.

"Carlyle are shareholders, not managers," Rump said.

Yet the reorganization of the company was criticized by outsiders like the SEIU, which said the restructuring would remove Carlyle from direct liability for any potential problems at nursing facilities. After several attempts by Carlyle and Manor Care to ease concerns about the takeover, with vague promises to uphold the quality of care at facilities, the SEIU said it will be watching closely to make sure Carlyle fulfills its promises.

"Carlyle has just bought themselves a major problem. There are serious problems with care for residents at Manor Care. Now Carlyle will have to fix those problems," said Julie Eisenhardt, an SEIU spokesperson.

-- Cecilia Kang

© 2007 The Washington Post Company