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(Reuters) - Kindred Healthcare Inc (N:KND) said it would buy Gentiva Health Services Inc (O:GTIV) in a cash and stock deal valued at $1.8 billion, including the assumption of net debt, ending its months-long pursuit of the home-healthcare provider.
Kindred said the deal, which it valued at $19.50 per share, would enhance its position as a provider of post-acute care and rehabilitation services.
Gentiva's shares rose 17.7 percent to $19.67 in early trading while Kindred's shares rose 9 percent to $21.52.
Kindred first offered to buy Gentiva in May with the aim of benefiting from an aging U.S. population.
Gentiva shareholders will receive $14.50 per share in cash and 0.257 Kindred shares for each share held.
The offer has an equity value of about $720 million.
The combined company will have pro forma net revenue of $7.1 billion, the companies said in a statement.
Kindred said it expected the transaction to immediately add to earnings and operative cash flow.
The deal would add 40-60 cents per share to pro forma earnings and $350-$450 million to pro forma cash flows after the second full year of the closing of the deal, the company said.
(Story refiled to correct that Kindred's shares rose 9 percent to $21.52, not fell 3 percent to $9.41)
(Reporting by Amrutha Penumudi in Bangalore; Editing by Saumyadeb Chakrabarty and Ted Kerr)