Humana acquired 40 percent minority interest in one of Kindred's businesses in the midst of a healthcare consolidation wave.
On the heals of CVS Health's acquisition of Aetna and UnitedHealthcare's plans to acquire DaVita Medical Group, Humana signed an agreement to acquire minority interest in Kindred's homecare business.
Here are five things to know:
1. Humana will pay $800 million through a joint venture with equity ownership by TPG Capital and Welsh, Carson, Anderson & Stowe, for minority interest in Kindred's homecare business, which covers the same geographic area as 65 percent of Humana's membership. The transaction includes related expenses to complete the separation from Kindred's long-term acute care and rehabilitation businesses.
The two private equity firms will separate Kindred at Home from the other businesses and form a joint venture with Humana to own Kindred at Home; Humana will own 40 percent and the two private equity firms will own 60 percent of the new entity, which includes around 40,000 caregivers who serve about 130,000 patients daily.
2. The acquisition will advance Humana's integrated care delivery strategy by making it easier for seniors with chronic conditions to engage healthcare providers. The move also is expected to spark growth in Kindred's homecare business, transforming it into a value-based care platform.
3. The deal is structured to give Humana a path to full ownership of Kindred's homecare business in three to five years with an exercise price in part determined by achieving certain clinical outcomes. Kindred at Home has annual revenues of around $2.5 billion.
4. Humana expects the transaction to close in the summer of 2018; it's still subject to customary state and federal regulatory approvals. Humana doesn't anticipate material impact to 2017 earnings from the pending transaction. The transaction will likely be slightly accretive to earnings per diluted common share in 2019 and beyond.
5. Morgan Stanley & Co. is the lead financial advisor to Humana and the sponsors while JPMorgan Chase is also acting as a lead financial advisor to the sponsors.