Feb 5, 2018

Behind the scenes of the Kindred Healthcare buyout

Humana showed interest in buying Kindred Healthcare while it was still connected to Aetna merger talks. Luke Sharrett / Bloomberg via Getty Images

Kindred Healthcare, the operator of numerous home health and hospice agencies and rehab hospitals, was holding acquisition talks for roughly a year and a half before it finally accepted the deal proposed by Humana, TPG Capital and Welsh, Carson, Anderson & Stowe, according to a new federal securities document.

The bottom line: There were many reasons Kindred decided to sell, including its large debt load and struggling finances. But executives also were worried about Congress cutting Medicare and Medicaid, a big revenue source for Kindred, to pay for the newly enacted corporate tax cuts.

The details: Kindred's buyout process started in earnest in the spring of 2016 and had a winding path until the deal was announced this past December.

  • More than a half dozen private-equity firms expressed interest in owning Kindred.
  • Humana CEO Bruce Broussard initiated a meeting with Kindred CEO Ben Breier at the 2017 J.P. Morgan Healthcare Conference to talk shop — even though Aetna was still trying to acquire Humana, and before a federal judge ruled against the Aetna-Humana deal.
  • By the time Aetna and Humana officially ended their deal last February, Broussard and Breier had already discussed "potential collaborations."
  • At one point, Kindred received a takeout offer for $16 per share from another interested party before due diligence was conducted, but still well above the $9 per share it ultimately accepted. Because the buyout process lasted so long, Kindred’s stock price fluctuated quite a bit over time.
  • The event that momentarily crippled Kindred's fire sale process: When the Centers for Medicare & Medicaid Services proposed slashing home health payment rates by $1 billion in 2019 by switching to a new payment system.
  • Breier and fellow industry CEOs lobbied CMS to scrap that proposal, and they got what they wanted, which helped boost Kindred's share price.
  • Kindred was still worried about its long-term business, which relies heavily on Medicare and Medicaid patients, turning the Humana and private equity offer into a priority.

1 big stat: Breier is expected to pocket a golden parachute of $19.2 million if the deal is approved and if he doesn't stick around after.

Clarification: This post has been corrected to show that Kindred’s $16 per share offer came before due diligence was conducted and that Kindred’s stock price was volatile over the process. 

Go deeper

Fed temporarily lifts Wells Fargo's growth restrictions

Photo: Streeter Lecka/Getty Images

The Federal Reserve said Wednesday it will temporarily lift Wells Fargo’s growth restriction put in place following the bank’s customer abuse scandals.

Why it matters: One of the nation's biggest lenders said the Fed's asset cap prevented it from lending more to struggling small businesses as part of the government's aid package. Now Wells Fargo says it will reopen its application process and lend to a broader set of business owners.

Coronavirus dashboard

Illustration: Sarah Grillo/Axios

  1. Global: Total confirmed cases as of 2 p.m. ET: 1,464,852 — Total deaths: 85,397 — Total recoveries: 315,105Map.
  2. U.S.: Total confirmed cases as of 2 p.m. ET: 402,923 — Total deaths: 13,007 — Total recoveries: 22,717Map.
  3. State latest: New York Gov. Andrew Cuomo issued an executive order for New Yorkers to vote by absentee ballot for June 23 primaries.
  4. Federal government latest: The U.S. has begun to see "glimmers of hope" despite its highest recorded number of deaths in 24 hours, Dr. Anthony Fauci said.
  5. Business updates: Roughly one-third of U.S. apartment renters didn't make April payments — The Fed will lift Wells Fargo's asset cap to help small business lending.
  6. 🎧 Podcast: The battle over billionaire coronavirus saviors
  7. What should I do? Pets, moving and personal healthAnswers about the virus from Axios expertsWhat to know about social distancingQ&A: Minimizing your coronavirus risk.
  8. Other resources: CDC on how to avoid the virus, what to do if you get it.

Subscribe to Mike Allen's Axios AM to follow our coronavirus coverage each morning from your inbox.

Sen. Kelly Loeffler liquidates stocks after uproar over coronavirus sell-off

Sen. Kelly Loeffler. Photo: Madnel Ngan/AFP via Getty Images

Sen. Kelly Loeffler (R-Ga.) and her husband Jeffrey Sprecher are liquidating their stock portfolio and moving holdings into exchange traded funds (ETFs) after coming under fire for purchasing and selling roughly $1.4 million in stock just before the market crashed in response to the coronavirus pandemic.

Why it matters: Loeffler, who faces a competitive reelection fight in November, is one of several senators under fire for selling shares shortly after a private briefing on the coronavirus — sparking accusations of insider trading.