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Beverly shares soar on possible $1.53 billion bid

| Wednesday, Jan. 26, 2005

LITTLE ROCK, Ark. -- Shares in Beverly Enterprises Inc. surged more than 25 percent Tuesday after a group of investment firms made a preliminary $1.53 billion bid to buy the nursing home and health care services company.

In a statement, Fort Smith-based Beverly said its board was "reviewing the preliminary expressions of interest" from Formation Capital LLC, an investment group including Appaloosa Management LP, Franklin Mutual Advisors LLC and Northbrook NBV LLC.

A Dec. 22 letter from Formation Capital Chief Executive Arnold M. Whitman attached to a filing with the Securities and Exchange Commission offered $11.50 per share for the company -- a 30 percent premium over the company's average closing price for the last 20 trading days. The letter said the offer was based on a total of 122,850,103 shares of common stock, 3,141,006 restricted shares and options to acquire 7.4 million shares of common stock.

The filing shows the investors already own 8.1 percent of Beverly shares.

Beverly shares rose $2.39, or 25.5 percent, to close at $11.77 in yesterday's trading on the New York Stock Exchange -- reaching a new 52-week high and suggesting that Wall Street expected the investment firms would have to increase their offer.

David Tepper, an owner of the Appaloosa hedge fund, would not discuss the transaction. A New York lawyer handling the transaction, David Golay, did not immediately return a phone message. But in the filing, the investment firms said they "remain prepared to raise the offer price accordingly."

The filing also says that Formation, which specializes in providing equity to the senior housing and long-term care industry, has acquired an interest in 152 facilities in 20 states during the past three years. The firm manages more than $650 million in assets.

In January 2002, Formation purchased all 49 of Beverly's Florida nursing homes for $165 million, but the two companies haven't struck any other deals since, according to Beverly spokesman Blair Jackson. Jackson also declined to say who Beverly hired earlier this month to advise on the takeover bid.

Beverly has 351 skilled nursing facilities, 18 assisted living centers and 52 hospice and home health centers. Through Aegis Therapies, the company provides rehabilitative services to its own facilities and to 585 facilities operated by others. Beverly operates in 37 states and Washington, D.C.

Last week, Beverly announced it would change its name to BEI to help reflect that the company is moving beyond its core nursing home business.

Beverly is a major force in the nursing home/health care services industries within Pennsylvania. Its nursing home division, Beverly Healthcare, operates 37 facilities statewide, include local operations in Canonsburg, Monroeville, Murrysville, Oakmont, Pittsburgh, Uniontown and Waynesburg, according to the Beverly Healthcare Web site. The company's AseraCare hospice division also operates a facility along Ardmore Boulevard in Forest Hills, while its Aegis Therapies, Aedon Staffing for health care providers, and Ceres Purchasing units all operate in the region.

Tepper, one of the principals in and founder of Appaloosa Management, is well-known in the Pittsburgh area, particularly on the campus of Carnegie Mellon University. David Tepper received his MBA from Carnegie Mellon in 1982, and last March, the university announced that Tepper and his wife had given the school the largest gift in its 104-year history -- $55 million -- for the Graduate School of Industrial Administration.

Following the announcement, the school's name officially was changed to the David A. Tepper School of Business.

Stephens Inc. analyst Nancy Weaver predicted Formation's bid might go higher.

"It's a sound offer and, yes, I do think (the sale) might go through," Weaver said. She credited Beverly's new management team with improving the company's balance sheet and making it more attractive.

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