MURFREESBORO, TN-Almost a decade after spinning it off, National Healthcare Corp. has entered into a merger agreement with National Health Realty, Inc. The deal between the locally headquartered companies is slated to close in the second quarter of 2007.

NHC senior vice president of corporate communications Gerald Coggin could not be reached for specifics, including the total merger value. According to a release, the agreement calls for each NHR common share not currently owned by NHC to be converted into one share of NHC Series A Convertible Preferred Stock plus $9 cash. In addition, NHR shareholders will receive a special dividend for the period from Jan. 1, 2007 until the deal closes. Each share of the preferred stock will be entitled to annual preferred dividends of $.80 per share and will have a liquidation preference of $15.75 per share.

A special committee of NHR’s board of directors recommended the merger, which has been approved by the board. The completion of the deal is subject to Hart-Scott-Rodino anti-trust review and approval by shareholders of both companies. There is no financing condition to the merger, according to the release.

“The proposed merger provides a larger asset and equity base that is anticipated to enhance our future growth and our prospects for long-term increases in shareholder value as we begin our 36th year of operation,” Robert Adams, NHC president and CEO, says in a statement. “Elimination of the lease payments NHC has been making to NHR will, assuming continuation of current operating trends, result in a substantial increase in our annual recurring free cash flow, even after providing for the preferred dividends which we will pay on the new Series A Preferred Stock. Also, NHC will now own a portfolio of first class healthcare retirement and assisted living centers which it, in fact, constructed between 1991 and 1997 and which continue to be critical to our operations.

“This strategic move will provide shareholders of both companies a focused, completely aligned approach in both development and operations. We expect the cash required to complete the merger will be provided substantially from NHC’s existing liquidity reserves,” he adds.

NHC formed NHR on Dec. 31, 1997. NHR owns 16 skilled nursing facilities, six assisted living centers, and one independent living center. NHR also owns first and second mortgage notes totaling approximately $13.2 million. NHC provides services to 74 long-term healthcare centers with 9,177 beds. NHC also operates 30 homecare programs, six independent living centers and assisted living centers at 22 locations. NHC’s other services include managed care specialty medical units, Alzheimer’s units, hospice and a rehabilitation services company.

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