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Beverly OKs takeover bid

| Thursday, Aug. 25, 2005

LITTLE ROCK, Ark. -- Nursing home operator Beverly Enterprises Inc. said Wednesday that it accepted a sweetened takeover bid from North American Senior Care Inc. that values the company at more than $1.9 billion and narrowly tops a counteroffer made last week by a rival bidder.

Under the revised deal, North American Senior Care will pay $13 per share in cash to acquire Beverly, whose directors have voted in favor of the proposal because it is in the "best interests" of its shareholders.

The bid from North American Senior Care, an investor group assembled for the Beverly transaction, is up from its previous offer of $12.80 a share and tops the recent $12.90 a share bid by an investor group led by Formation Capital LLC. Formation Capital had led a hostile takeover attempt of Beverly earlier in the year, and that prompted Beverly to put itself up for sale.

North American would absorb $339 million in Beverly debt, a figure that applies Fort Smith-based Beverly's $213 million in cash on hand toward its debt total.

Despite the higher offers, Beverly shares fell 8 cents to close at $12.67 Wednesday on the New York Stock Exchange. Its shares have traded in a 52-week range of $7.01 to $13.44.

Beverly said its board accepted the latest North American offer "based on its conclusion that the increased price, modified terms and likelihood of completion of this agreement are in the best interests of BEI shareholders."

A week ago, North American appeared to have the acquisition locked up at $12.80 per share, but Formation submitted a bid on Friday of $12.90 per share.

For Formation or another investor to try to top North American's bid, the investor would now have to pay a $40 million termination fee. Such a fee was in place after the initial bid but it was significantly lower at that time, Beverly spokesman Blair Jackson said yesterday.

But more bids were still possible.

Beverly chairman and chief executive William R. Floyd noted in the release that "it is not uncommon in auction situations for proposals and counter-proposals to be received."

Floyd said Fort Smith-based Beverly's board has sought the most favorable terms, price and conditions in sorting through its suitors.

"Based on these criteria, the board concluded that the increased offer from (North American) was in the best interests of (Beverly) shareholders. As a result, (Beverly) has entered into an amendment to the original merger agreement with North American Senior Care," Floyd said.

North American has pledged to keep the company headquarters in Fort Smith.

After the first bid, Beverly said 33 parties expressed interest in the company during the auction process, and that Beverly entered into confidentiality agreements with 24 of the potential buyers. Ten of the suitors advanced in the bidding.

The company has warned that expenses related to the auction could affect its financial performance.

Beverly had 2004 revenues of $2 billion and earned $43 million.

Beverly operates 346 skilled nursing facilities, 18 assisted living centers and 56 hospice/home care agencies. The company also offers contract rehabilitation services to nursing homes through Aegis Therapies.

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