agreed to sell a majority stake of a home hospice businesses it bought last year to a private equity buyer for $2.8 billion. Shares jumped 1.3% early Thursday on the news.
The business is a division of Kindred at Home, a home health provider that
(ticker: HUM) acquired last year. That deal valued Kindred at Home at $8.1 billion.
At the time of its April 2021 agreement to fully acquire the company, Humana said it would eventually divest a majority stake of Kindred at Home’s hospice and community care operations.
The deal announced Thursday is a fulfillment of that plan. Humana said it would sell 60% of the Kindred at Home division called KAH Hospice to the private-equity firm Clayton, Dubilier & Rice for a cash payment of $2.8 billion.
“When viewing this transaction in conjunction with our purchase of the broader Kindred at Home platform, we have been able to achieve our objective to substantively increase our footprint in home care by acquiring one of the leading home health platforms in the country at an attractive valuation for our shareholders,” said Susan Diamond, Humana’s chief financial officer.
Humana said it expects the deal to close in the third quarter of the year, and that it will use the proceeds from the sale for debt repayment and share repurchases.
Humana shares are up 0.4% so far this year as of the end of trading on Wednesday. The stock is up 4.7% over the past 12 months.
Kindred at Home also offers home health services. At the time of the acquisition, Humana said that Kindred at Home was the country’s largest provider of home-based care.
The KAH Hospice division offers hospice, palliative, community, and personal care, Humana said. The $2.8 billion cash price for 60% of the business reflects an enterprise valuation of $3.4 billion, which Humana said was a multiple of 12 times the division’s current year forecasted adjusted earnings.
“While palliative and hospice services are important components in the continuum of care that Humana offers patients, we are confident that we can deliver desired patient outcomes and improved customer experiences through partnership models rather than fully owning KAH Hospice,” Humana’s Diamond said.
Humana shares trade at 18.5 times earnings expected over the next 12 months, according to FactSet, close to its 5-year average of 18.4 times earnings. Of the 24 analysts tracked by FactSet who cover the stock, 18 rate it a Buy or Overweight, while six rate it a Hold.
Write to Josh Nathan-Kazis at [email protected]