Advocat Receives Unsolicited Takeover Bid

May 11, 2012

May 11, 2012. Skilled nursing operator Advocat received an unsolicited offer today for 100% of its outstanding shares for $8.50 per share from Atlanta-based Covington Investments. The offer represents a 96% premium to the prior day's closing price and a 71% premium to the average closing price during the past 30 days. The company's shares haven't seen $8.50 per share for two and a half years. Apparently, Covington approached Advocat's board earlier this year with a price of $7.50 per share, which was rejected as insufficient. The current offer values the company at about $50 million. Advocat has been trying to spruce up its facilities, including expanding its Medicare business, but its profitability and share price have been in the doldrums for a few years. Covington has been buying up the stock for many months and now owns just below 9% of the shares. We would be surprised if the board refused to negotiate with such an attractive offer on the table, one which most shareholders should want to take if they haven't already sold on the price surge. Average daily trading volume is below 5,000 shares, but today it had reached 170,000 shares by early afternoon with the price up 70% and hovering around $7.50 per share.


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