Terms of the deal call for Genesis to pay $8.50 per share in cash for Irvine, Calif.-based Sun, a premium of 38% over the target's Wednesday close. The total deal value includes cash and debt acquired.

Kennett Square, Pa.-based Genesis, which since 2007 has been owned by private equity firms JER Partners and Formation Capital LLC, is one of the nation's largest skilled nursing care providers with more than 200 centers and assisted living residences in 13 eastern states. The company also supplies rehabilitation therapy to more than 1,100 healthcare providers in 35 states and the District of Columbia.

Sun offers similar services via 158 cents and other operations totaling 21,444 licensed beds in 23 states. Genesis in a statement said that the combination would create a $4 billion-revenue giant that will be better able to weather changes in healthcare policy.

"This is a tremendous opportunity to grow our business with an established industry operator," Genesis CEO George V. Hager Jr. said in a statement. "Strategically, we will be able to improve economies of scale while enhancing our footprint and breadth of services."

Genesis laid the foundation for this deal back in March when it announced a sale-leaseback deal with Health Care REIT Inc. to sell substantially all of its real estate assets for $2.4 billion and then lease the properties back from Health Care REIT and continue to operate them.

Sun chairman and CEO William A. Mathies in a statement noted that Genesis, like Sun, now operates a predominately leased portfolio of centers.

"This transaction brings together two companies with similar operating structures, experienced and deep management teams, and cultures committed to quality patient care," Mathies said. "Together, the combined company will be able to use its strengths on a broader scale, which will be advantageous as the post-acute care industry continues to evolve."

Barclays is acting as financial adviser to Genesis, with Thomas Kennedy, Jeremy London, Neil Rock, John Rayis and Steven Messina of Skadden, Arps, Slate, Meagher & Flom LLP joining with attorneys from Williams Mullen and Arnall Golden Gregory LLP to provide legal counsel.

Sun is advised by MTS Health Partners LP and O'Melveny & Myers LLP.