Analyst says RehabCare Group will make acquisition

With larger stock sale planned, analyst says RehabCare will buy long-term acute hospital chain

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NEW YORK (AP) -- Rehabilitation program operator RehabCare Group Inc.'s proposed stock sale indicates the company may be preparing to make an acquisition, a Stifel Nicolaus analyst said Monday.

Robert Hawkins thinks the company is preparing to buy a long-term acute care hospital or specialty hospital operator in a deal worth $175 million to $225 million. He suggested RehabCare might acquire privately owned Regency Hospital Co., LifeCare, or Triumph Healthcare.

Hawkins based his analysis on a shelf registration RehabCare filed on Friday. The company said it plans to sell up to $25 million in stock, adding to a $100 million sale it proposed in July.

Regency is based in Alpharetta, Ga., and runs a total of 24 hospitals in the South and Midwest. LifeCare is based in Plano, Texas, and has 19 hospitals, while Triumph, of Houston, has 21. Each chain has a few non-long term hospitals. He added that Regency and LifeCare would be more attractive than Triumph.

"Since the fourth quarter, management has been stating that it believes that the division's overhead can support between 20 and 25 hospitals," Hawkins wrote. He said RehabCare needs to acquire about that many hospitals to reach "full profit potential."

In morning trading, RehabCare shares fell 49 cents, or 2.3 percent, to $20.53.