Sun Healthcare Group Inc., an Irvine nursing home operator, saw its shares rise on news of a competitor buying another company.
Sun closed up 8% Tuesday with a market value of about $307 million.
Kindred Healthcare Inc. of Louisville, Ky., which includes nursing homes, said it was buying St. Louis-based RehabCare Group Inc. for $877 million on Tuesday. That deal will create a company with more than $6 billion in annual revenue and operations in 46 states.
As for Sun, its shares likely were up on investor enthusiasm for more merger and acquisition activity in the healthcare services sector, according to analysts.
“We would assume that the pressures from private payers and Medicare will continue, and this will encourage companies to look for ways to cut costs and be more efficient, with mergers one way to do this,” analyst Joe France of New York investment bank Gleacher & Co. said in a Wall Street Journal report.
Sun, which has annual revenue of $1.9 billion, operates 202 facilities in 46 states. Last year, it spun its real estate off as Sabra Health Care REIT Inc. in an attempt to create value for those holdings.
