XML 23 R6.htm IDEA: XBRL DOCUMENT

Onex Transaction

9 Months Ended

Sep. 30, 2011

Note 2. Onex Transaction

On September 6, 2010, Purchaser entered into a share exchange agreement with ResCare, pursuant to which it agreed to acquire all shares of ResCare common stock not already owned by Onex Corporation and its affiliates, including Onex Partners LP (collectively, the Onex Investors), for a purchase price of $13.25 per share on the terms and conditions set forth therein.

In accordance with the share exchange agreement, Purchaser commenced a tender offer to acquire all outstanding shares of ResCare common stock not already held by Purchaser and its affiliates (the Public Shares) on October 7, 2010. On November 16, 2010, the Onex Investors (including Onex Partners III LP) contributed $120.0 million to Purchaser in exchange for Purchaser’s common membership interests and $158.8 million for Purchaser’s preferred membership interests that accrue a preferred return at the rate of 4.8%. The tender offer was consummated on November 16, 2010 (the Stock Tender Offer). Purchaser purchased 21,044,765 Public Shares in the Stock Tender Offer, and, at that time, the Onex Investors beneficially owned 87.4% of the issued and outstanding shares of ResCare’s common stock on an as-converted basis. The change of control occurred on November 16, 2010, which is the acquisition date for accounting purposes.

On December 20, 2010, the ResCare shareholders approved the second-step share exchange transaction (the Share Exchange) in which all Public Shares not acquired in the Stock Tender Offer, excluding shares held by members of our management who agreed to roll-over their existing equity ownership into equity of Onex Rescare Holdings Corp. (Rollover Holders), were to be exchanged for $13.25 per share, without interest.

The following transactions occurred concurrently on December 22, 2010:

· ResCare entered into new senior secured credit facilities, comprised of a new $170 million term loan facility and an amended and restated $275 million revolving credit facility;

· ResCare issued $200 million of unsecured 10.75% Senior Notes due 2019 (Notes) in a private placement under the Securities Act of 1933;

· ResCare repurchased $120 million (approximately 80%) aggregate principal amount of its previously tendered 7.75% Senior Notes due 2013; the remaining $30 million of these Senior Notes that were not repurchased were satisfied and discharged by delivering to the trustee amounts sufficient to pay the applicable redemption price in January 2011;

· The Purchaser completed the previously announced acquisition of all of the publicly held common shares of ResCare through the second-step share exchange transaction, whereby each outstanding share of ResCare common stock not currently held by Onex Investors was exchanged for the right to receive $13.25 in cash ($56.9 million); and

· The Purchaser redeemed preferred membership interests held by certain of the Onex Investors for an amount equal to the contributions ($158.8 million) made by them in respect of the purchase of such interests plus the accrued preferred return ($0.8 million) on such interests through the redemption date.

Following the Share Exchange, the issuance of the Notes and receipt of required regulatory approvals, Onex Partners LP and the other Onex Investors holding shares of ResCare’s common and preferred stock prior to the commencement of the Stock Tender Offer contributed those shares to Onex Rescare Holdings Corp. (New Holdco) in exchange for shares of New Holdco’s nonvoting common stock. On December 22, 2010, an independent group of co-investors contributed $1.4 million to New Holdco in exchange for shares of New Holdco’s voting common stock. During the first quarter of 2011, New Holdco contributed the $1.4 million to ResCare. In addition, the Onex affiliates holding membership interests ($120.0 million) in Purchaser and the Rollover Holders contributed their interests in such entity to New Holdco in exchange for shares of New Holdco’s voting common stock. Following these contributions, Purchaser was merged into ResCare, with ResCare as the surviving entity. ResCare is now a wholly owned subsidiary of New Holdco, which in turn, is now owned by the Onex Investors, certain co-investors and members of our management team.

The total purchase price was $452.4 million based on 34.1 million outstanding ResCare shares (fully converted) at $13.25 per share.

The purchase price allocation is as follows:


	Nov. 16,					Adjusted
	2010		Final			Fair Value
	Preliminary		Allocation			at Nov. 16,
	Allocation		Adjustments			2010
Cash and cash equivalents	$	15,459	$	—		$	15,459
Accounts and notes receivable	266,508		—			266,508
Deferred income taxes	14,896		330			15,226
Prepaid expenses and other current assets	25,985		—			25,985
Property, plant and equipment	96,388		(10,114		)	86,274
Goodwill	229,931		12,438			242,369
Other intangible assets	321,249		(7,210		)	314,039
Other assets	12,079		—			12,079
Total assets acquired	982,495		(4,556		)	977,939
Current liabilities	191,007		—			191,007
Long-term debt	205,437		—			205,437
Deferred income taxes	100,223		(8,670		)	91,553
Other long-term liabilities	33,384		3,914			37,298
Noncontrolling interest	—		200			200
Total liabilities assumed	530,051		(4,556		)	525,495
Net assets acquired	$	452,444	$	—		$	452,444

The fair values were estimated by the Company’s management based on independent appraisals, fair values of equivalent properties or analysis of expected future cash flows. During the quarter ended September 30, 2011, the Company received the final third-party valuation report and adjusted the purchase price allocation accordingly. The December 31, 2010 balance sheet has been revised for the above adjustments in accordance with U.S. GAAP under ASC 805, Business Combinations. The impact on the 2010 income statement was immaterial.

The gross contractual amount of accounts and notes receivable at November 16, 2010 was $293.8 million. The Company estimates that $27.3 million of the receivable-related contractual cash flows as of November 16, 2010 are not expected to be collected

The following table details the goodwill and identifiable intangible assets acquired in the Onex transaction and their estimated values and expected amortizable lives:

	Fair		Useful Life
	Value		(Years)

Goodwill	$	242,369	Indefinite
Other Intangible assets:
Licenses	226,370		Indefinite
Trade names	61,420		20
Customer relationships	24,190		20
Covenants not to compete	1,480		2
Other	579		5
Total other intangible assets	314,039
Total intangible assets	$	556,408

There were no purchased research and development assets acquired and written-off in connection with the Onex transaction. Approximately $169 million of the goodwill is expected to be deductible for tax purposes.