Skilled Healthcare Up 20% On Merger Plan

Skilled Healthcare (NYSE: SKH) jumped more than 20 percent Tuesday after the company said it will merge with privately held Genesis HealthCare.

One analyst estimated Tuesday that the value of Skilled Healthcare shares following the merger at between $7 and $9.50 per share.

Skilled Healthcare traded recently at $7.44 per share, up 21 percent.

"The transaction is somewhat unusual in that there is no direct purchase price," Credit Suisse's Ralph Giacobbe said in a research note.

"It's difficult to ascribe a value" because of limited historical data on Genesis and unreliable valuations in the skilled nursing home sector said Giacobbe, who called his estimate "an admittedly wide range."

In the proposed stock swap, Skilled Healthcare's current holders would own 25.75 percent of the combined companies, expected to have annual revenue of about $5.5 billion. Skilled Healthcare posted 2013 revenue of $842.3 million.

Although Neutral on Skilled Healthcare, Giacobbe said he "sees the merit" in the transaction which expands the scale and geography of the combined company and "ideally better positions it for growth."