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 Humana, TPG Capital and Welsh, Carson, Anderson & Stowe will pay $9
per share in cash. They said that, with debt and other costs, they
are paying about $4 billion for the company.
The companies, both based in Louisville, Kentucky, plan to split
Kindred into two separate companies: a larger one that focuses on
home healthcare and the other focused on long-term acute care and
rehabilitation.
Humana, the fourth largest U.S. health insurer, will pay $800
million in cash for Kindred shares and to cover other costs. That
will give it a 40 percent stake in Kindred at Home, which will
employ the 40,000 Kindred caregivers who serve about 130,000
patients daily. It will not have a stake in the second Kindred unit.
Humana's insurance business is focused on individuals in the U.S.
government's Medicare program for the elderly and disabled. The
acquisition builds on Humana's focus on using health providers in
members' homes to improve health outcomes and save costs.
The deal comes after competitors Aetna Inc. and UnitedHealth Group
Inc announced deals that will expand the reach of those insurers
into healthcare services in locations and sites that charge less
than hospitals.
Soaring healthcare costs have been a national issue, and the federal
government has been restricting its spending for health, putting
pressure on insurers.
Wall Street analysts said the Kindred deal, which had been reported
on Sunday based on unnamed sources, would not end speculation that
Humana itself could be a takeover target in the current healthcare
consolidation wave.
Earlier this month, Aetna announced a $69 billion deal to be bought
by CVS Health Corp, fueling Wall Street interest in how smaller
rivals Humana and Cigna Corp will compete.
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Humana agreed two years ago to be bought by Aetna but that deal was
blocked by federal antitrust regulators who said that it would be
anticompetitive. A similar deal by Anthem Inc. to buy Cigna was also
blocked at the time.
The company has the right to purchase the 60 percent stake in
Kindred at Home owned by the private equity firms at the end of the
third year. The deal is expected to close in the summer of 2018.
Humana said it expects the deal to "slightly" add to earnings per
share in 2019 and beyond.
Morgan Stanley is the lead adviser to Humana and the private equity
firms and JP Morgan is also a lead adviser to the private equity
firms. TripleTree and law firm Fried, Frank, Harris Shriver &
Jacobson advised Humana. Evercore did a fairness opinion for
Humana's board of directors. Barclays and Guggenheim Securities are
financial advisers to Kindred and Cleary Gottlieb Steen & Hamilton
LLP is its legal counsel.
Kindred shares were trading at $8.98 per share, down 5 percent,
having gained on Monday on Sunday reports of the deal. The
$9-per-share price was a 4.7 percent premium over the stock's Friday
close.
Humana shares were down 1 percent, or $2.28, at $244.10.
(Reporting by Caroline Humer in New York and Manas Mishra in
Bengaluru; Editing by Frances Kerry and Jonathan Oatis)
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