Humana and PE Firms in Talks to Buy Kindred Healthcare --Update
December 17 2017 - 2:09PM
Dow Jones News
By Anna Wilde Mathews, Dana Mattioli and Dana Cimilluca
Humana Inc. is in advanced talks to join with two private-equity
firms in a deal to acquire home-care provider Kindred Healthcare
Inc., a move that would add to a cascade of transactions aiming to
bring together insurance operations with other health-care
businesses.
As part of the complex deal, Kindred, a sprawling company with
$7.2 billion in revenue last year, is to be divided, according to
people familiar with the matter. Welsh, Carson, Anderson &
Stowe and TPG would take over Kindred's facility-focused business,
which includes long-term acute-care hospitals and rehabilitation
centers, while the private-equity firms together with Humana would
get its home- and hospice-care operation.
The deal would value Kindred at $9 a share, the people said, a
modest premium to where the shares currently trade after rallying
sharply in recent weeks. Kindred stock closed Friday at $8.60,
giving the debt-laden company a market value of about $750 million.
Factoring in debt, Kindred has a so-called enterprise value of
about $4 billion.
Though a deal could be announced soon, it's still possible the
talks could fall apart.
Kindred is the biggest home-health and hospice operator in the
U.S. Its facilities business, meanwhile, includes around 77
long-term care hospitals and 19 rehabilitation hospitals.
Its shares have lagged amid skepticism about the future of some
of the company's core businesses, which are heavily dependent on
reimbursement from the federal Medicare program. Kindred's 2015
acquisition of Gentiva Health Services Inc. also left the company
with a heavy debt load. To help improve its finances, Kindred has
been selling off its nursing homes.
Humana, like Kindred based in Louisville, Ky., already has some
home-health operations, and has said it wants to get deeper into
that business as a way to better manage the health of its Medicare
enrollees. The insurer has said it believes closer ties to
home-health services and physicians will help it improve care and
hold down costs. "Home is often a superior clinical environment to
deliver care and reduce high-cost hospital admissions," Chief
Executive Bruce Broussard said during Humana's third-quarter
earnings call on Nov. 8.
Rivals are making similar moves. UnitedHealth Group Inc. has
been on a years-long campaign to purchase doctor groups,
urgent-care clinics and surgery centers. The company announced
earlier this month it would buy the physician-group unit of DaVita
Inc. for $4.9 billion.
Meanwhile, Aetna Inc. recently agreed to be acquired by
drugstore giant CVS Health Corp. for nearly $70 billion. CVS and
Aetna have said they want to use the pharmacies as a source of care
and coordination for members, including in the home.
Laura Cooper contributed to this article.
Write to Anna Wilde Mathews at anna.mathews@wsj.com, Dana
Mattioli at dana.mattioli@wsj.com and Dana Cimilluca at
dana.cimilluca@wsj.com
(END) Dow Jones Newswires
December 17, 2017 14:54 ET (19:54 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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