A Kindred Healthcare shareholder has come out against a $4.1 billion deal by Humana and two private equity companies to acquire the home healthcare giant, calling the $9 per share valuation "disappointing and grossly inadequate."
In a letter to Kindred's president and CEO Benjamin Breier on Wednesday, Brigade Capital Management said it is a "terrible time" to sell off Kindred, since the provider won't see a return on its operational improvements until next year.
Humana, TPG Capital and Welsh, Carson, Anderson & Stowe announced on Dec. 19 that they would split Kindred into two companies, with TPG and Welsh taking over its long-term care hospitals and inpatient rehab facilities.
The two private equity companies and Humana together will operate Kindred's home health, hospice and community care businesses as a stand-alone company. Humana will own 40% of that company, and the private equity firms will own the rest.
But Brigade Capital said in its letter that Humana and the private equity companies are taking advantage of temporary issues that affected the home healthcare provider's stock price and "distorted the company's true earning potential."
Kindred's stock price fell by 15% in July after the CMS proposed to change its home health reimbursements, a move that the agency ultimately dropped from the final rule, the letter said. Kindred also has sold off some of its low-value assets, such as skilled nursing facilities, which could help the provider post rosier earnings next year.
"In our view, the deal price is not reflective of Kindred's intrinsic value and will short-change existing shareholders. Kindred is positioned for significant stock price appreciation," the letter said. "There is no urgency to sell the company, and conducting a sale process utilizing Kindred's significantly distorted trailing 12 month performance seems particularly misguided."
Kindred is the nation's largest operator of post-acute facilities in home and hospice care, rehabilitation services and long-term acute care. Its 2016 revenue totaled $7.2 billion, according to Modern Healthcare's financial database. Its home and hospice care segment brought in $2.5 billion of that, while the hospitals and rehab facilities brought in $3.8 billion. It serves patients in 2,475 locations in 45 states.
Brigade Capital has a 5.8% stake in Kindred.
Kindred and Humana did not immediately respond to requests for comment on Wednesday.
