Humana Inc. plans to fully acquire home health provider Kindred
at Home from private equity firm Welsh, Carson, Anderson & Stowe (WCAS) and
TPG Capital, the insurer said on April 27. (WCAS owns a controlling stake in
MMIT, AIS Health's parent company.) The insurer also reported strong financial
results, with first-quarter adjusted earnings per share (EPS) of $7.67 beating
Wall Street's projected consensus of $7.07, or $1.04 billion in pretax income.
Humana CEO Bruce Broussard said during an April 28 call with investors
discussing the firm's first-quarter results that the Kindred acquisition
"will enable us to more closely align incentives to focus on improving
patient outcomes, and on reducing the total cost of care."
Humana already controlled 40% of Kindred, and will purchase the remaining 60%
at a total valuation of $8.1 billion. According to a Humana press release about
the deal, Kindred "has locations in 40 states, providing extensive
geographic coverage with approximately 65 percent overlap with Humana's
individual Medicare Advantage membership."
Per a transcript prepared by Seeking Alpha, Broussard said during the call that
Humana plans to divest Kindred's hospice operation, possibly through an initial
public offering.
The move received positive reviews from Wall Street. Jefferies analyst David
Windley wrote in an April 28 investor note that "with greater control,
[Humana] should be able to both internalize more home health visits (from 19%)
and increase the VBC [value-based care] benefit."
One day after unveiling its deal with Kindred, Humana updated its 2021 EPS
guidance "to a range of $19.62 to $20.12" and reaffirmed its adjusted
EPS guidance of $21.25 to $21.75 while projecting membership growth in a
"range of approximately 425,000 to 475,000 members," according to a
press release announcing first-quarter results.
Citi analyst Ralph Giacobbe was bullish on Humana, writing in an April 28
investor note that "recent operating momentum, attractive MA [Medicare
Advantage] backdrop, and a solid growth profile…should allow [Humana] to trade
above its historical average and market multiple."
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