Kindred Healthcare Inc (KND) agreed to buy RehabCare Group Inc (RHB) for about $900 million in a cash-and-stock deal to create one of the largest post-acute healthcare services company in the United States.

The deal, at about $35 for every RehabCare share, represents a premium of 37% to RehabCare's Monday closing price.

Each RehabCare shareholder will get $26 a share in cash and 0.471 of a share of Kindred common stock. Kindred expects to issue about 12 million shares in connection with the deal.

The deal is expected be closed on or about June 30 and also assumes about $400 million of debt. Kindred expects the combined company to save about $40 million in costs within two years.

Kindred said the deal will be "highly accretive" to earnings and operating cash flows immediately upon closing, excluding one-time items related to the transaction.

The combined company will operate in 46 states and have over $6 billion in annual revenue, the companies said in a joint statement.

The deal has been approved by the boards of both companies and, according to the terms, two members of RehabCare's board will join the Kindred board after the deal closes.

Kindred said it has obtained a financing commitment for the deal from JPMorgan Chase Bank (JPM), Morgan Stanley Senior Funding and Citigroup Global Markets.

It expects to have in place about $1.9 billion of long-term financing, of which about $1.6 billion is expected to be outstanding at the time the deal closes.

The company said in connection with the acquisition of RehabCare, it has suspended its fiscal 2011 earnings guidance.

Separately, both the companies also posted fourth-quarter results that handily beat market estimates.

Morgan Stanley acted as the financial adviser to Kindred, while CitiGroup advised RehabCare.
Kindred shares closed at $19.48 Monday on the New York Stock Exchange, while RehabCare shares closed at $25.47.