Humana in Talks To Buy Kindred With Equity Firms -- WSJ
December 18 2017 - 03:02AM
Dow Jones News
By Anna Wilde Mathews, Dana Mattioli and Dana Cimilluca
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (December 18, 2017).
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 yearslong 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.
The insurers' moves into the health-care provider businesses,
often with the goal of reducing patients' use of hospitals, are
being countered by hospital companies. Major nonprofit hospital
operators Dignity Health and Catholic Health Initiatives have
announced they are combining. Ascension and Providence St. Joseph
Health, also nonprofits, are in talks about a potential merger that
would create the biggest U.S. hospital owner.
For insurers, the tack is partly a reaction to the death of a
previous round of proposed deals. Aetna's $34 billion planned
acquisition of Humana ran aground this year in the face of an
antitrust challenge by the Justice Department. Anthem Inc.'s
planned takeover of rival Cigna Corp. was also blocked.
Cross-industry combinations like the new round of proposed deals
could avoid such pushback.
In the wake of the collapse of its Aetna deal, analysts have
suggested Humana itself might be acquired, a possibly that would
seem more remote as a result of a tie-up with Kindred -- at least
for now.
Humana has a long, on-and-off history in the health-care
provider business. In 2015, it sold off Concentra, an urgent-care
and occupational-health clinic operator. It was once a major owner
of hospitals, but spun them off in 1993 after rival health plans
steered patients to competitors.
TPG and Welsh, Carson have deep experience in the health-care
industry. This year, for example, TPG agreed to sell surgery-center
owner Surgical Care Affiliates Inc. to UnitedHealth for $2.3
billion.
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 18, 2017 02:47 ET (07:47 GMT)
Copyright (c) 2017 Dow Jones & Company, Inc.
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