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Gentiva Makes $415M Deal

Gentiva Health Services Inc., the country's largest

provider of home health care services, said yesterday it is selling the

company's Specialty Pharmaceutical Services division to a Memphis-based

pharmaceutical distributor for $415 million in cash and stock.

The deal continues the slimming of Melville-based Gentiva so it can focus

on health-care services.

"Once this deal closes," said Gentiva vice president Michael Johns, "it's

really going to clarify our corporate and business mission in a way that should

prove beneficial to long-term growth prospects."

The deal also would leave Gentiva with no debt and cash in the bank of from

$60 million to $80 million.

The buyer is Accredo Health Inc., one of the country's largest providers of

specialized pharmacy services. It is acquiring Gentiva's line of drug products

for high blood pressure, viral infections, multiple sclerosis and immune

deficiencies and other ailments along with 39 pharmacies and 1,400 employees

around the country. Most of those employees, Johns said, are expected to remain

under the Accredo banner.

Gentiva has one pharmacy in the area, in Plainview. Several dozen employees

in its Melville headquarters are affiliated with the specialty pharmacy

division.

Gentiva has more than 300 locations and 4,800 employees in the United

States, about 140 of them locally. In fiscal 2000, the company reported a loss

of $104 million on revenue of about $1.5 billion. As the result of the sale,

chairman Edward A. Blechschmidt said revenue from the company's continuing home

health operations in 200l is expected to be about $720 million.

For the first nine months of 2001, home health services generated $540.8

million, down from $555.4 million for the same period a year earlier. Specialty

Pharmaceutical Services was responsible for $547 million in that period, up

from $515.5 million.

Gentiva was created in March 2000, when Olsten split off its health

services business. It has since sold its contract home-health staffing

business, which generated about $100 million in sales, to concentrate on the

provision of health care services in the home.

The company said it expects the proceeds of the sale to Accredo to be

distributed to its shareholders after the deal is completed in April. The terms

are about half cash and half stock.

The deal drew mixed reactions from analysts. SWS Securities analyst Anne

Barlow told Reuters, "I think it's a great deal for Accredo and Gentiva. It

shows a lot of foresight on Accredo's part." And Gentiva shareholders will get

a stake in a company that has performed well, Barlow said.

But Raymond James & Associates saw a downside for Gentiva and downgraded

its rating from "Strong Buy" to "Market Perform." According to Raymond James

analyst John W. Ransom, the deal has "limited upside" for Gentiva's earnings

per share.

The shares of both companies rose after the announcement. Gentiva closed at

$23.71, up $2.12. Accredo shares rose more than 22 percent, up $8.58, to

$47.26.

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