Humana’s Intriguing $2.8 Billion, 60% Sale of Kindred’s Hospice, Personal Care Assets
Humana Inc. (NYSE: HUM) has agreed to sell 60% of its Kindred at Home hospice and personal care assets to private equity firm Clayton Dubilier & Rice (CDR).
The transaction is expected to close in the third quarter of this year. And its surrounding details are interesting for multiple reasons.
The first is the price tag: $2.8 billion for just a portion of Kindred’s palliative care and personal care business.
It’s also intriguing that Louisville, Kentucky-based Humana has decided to keep 40% of those assets for now. Going forward, the company says it feels comfortable building on partnerships in personal care and palliative care.
“While hospice and palliative care services are important parts of the continuum of care that Humana provides to patients, we believe we can deliver desired patient outcomes and improve the client experience through partnership models rather than to fully own KAH Hospice,” said Humana’s chief financial officer, Susan Diamond. A declaration.
Diamond also noted that Humana had considered and explored a “wide range of alternatives”, but ultimately came up with the partial sale to CDR – a buyer who is another notable party to the deal.
Another private equity firm is diving headfirst into home care and adjacent spaces. CDR’s portfolio includes, among others, agilon health (NYSE: AGL), a value-based primary care company; Vera Whole Health, a value-driven healthcare provider; and Healogics, a wound care company.
CDR has also invested in naviHealth, which is now owned by Optum of the UnitedHealth group.
“With CD&R’s established relationships with physicians, value-based care expertise and history of providing strategic capital to a wide range of businesses, we are confident that these divisions are well positioned to succeed under the jointly owned by Humana and CDR,” Diamond said.
Between the United Health Group (NYSE: UNH)-LHC Group Inc. (Nasdaq: LHCG) deal and this one, there were two multi-billion dollar purchases in home care, home health and palliative care in less than a month. And who knows what might ultimately happen with Enhabit Home Health & Hospice, the former business segment of Encompass Health (NYSE: EHC).
Whether this is a trend — or just an abnormal time — remains to be seen, Les Levinson, co-chair of the transactional healthcare practice at Robinson & Cole LLP, told Home Health Care News.
“I think we’re all going to keep our eyes peeled to see if this is the start of a trend,” Levinson said. “A trend where you see these transactions happening, and happening more frequently. These deals clearly stand out in their financial terms, with different numbers than we’ve seen before.
Humana originally acquired part of Kindred at Home in 2018. Three years later – in April last year – it acquired the remainder. Kindred at Home is one of the largest, if not the largest, home care providers in the country. The transition from the Kindred brand to Humana’s “CenterWell” brand is currently underway.
Immediately following the deal, which was worth $8.1 billion in enterprise value, Humana announced it would seek to divest Kindred’s palliative care and personal care assets, viewing them as non-essential to a strategy. focused on home value.
But it is a question, once again, of maintaining this participation of 40%.
“[Humana] still has a fairly large minority stake here,” Levinson said. “He hedges his bet a bit and keeps one foot in the door. They say they want to collaborate with others, but at the same time they keep their hands on the wheel.
From Humana’s point of view, the deal also obviously brings something valuable: money. Despite this, it’s possible that CDR got a relatively good deal, given the valuation comparisons of other home health and palliative care companies today.
“They’re able to bring in a lot of cash and improve their balance sheet, while maintaining a significant minority investment,” Levinson said. “They may have thought, given current valuations, that now was a good time to sell. Usually when you hold out for the best possible price [for an asset], it usually doesn’t work. Selling at an attractive price is not a bad strategy.