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Cano in play but likely buyer still murky

Sep 26, 2022
Illustration of a red cross on a billboard with a "SALE" sticker.

Illustration: Lindsey Bailey/Axios

Activist-pressured Cano Health is working with advisers on a possible sale, with Humana and CVS among those reportedly in the running.

Why it matters: While it's largely no secret that Cano has been effectively in play for some time, it's still not obvious who the most logical buyer is — and it's especially not clear where the math will shake out in a potential deal.

What they're saying: Some sources see Humana as the most probable buyer given it already owns a stake in Cano, plus it has a right of first refusal — as agreed upon back in 2019.

  • "Humana controls their destiny," one source says. "It's their deal to lose," another source adds, "unless price gets so high that they are willing to let it go."
  • Humana on its latest earnings call said it sees a $700 billion TAM in value-based primary care for seniors, reiterating its belief in the long-term importance of the sector.
  • Humana has a vested interest in Cano's future, with Cano being its largest primary care provider in Florida, per a securities filing.

Yes, but: "[Cano] doesn't fit their fact pattern," a third source says.

  • Humana is known for striking JV partnerships and making equity investments in other health care-capitated partners — and then seeing what happens. (Versus UnitedHealth, which tends to buy things outright from the get-go.)
  • Plus, it already owns Conviva Care Centers, and recently committed more capital to value-based primary care network Centerwell, its JV partnership with Welsh, Carson, Anderson & Stowe.

Meanwhile, CVS has been public about its desire to own primary care after losing ONEM to Amazon.

Be smart: CVS just agreed to buy home health business Signify Health in an $8 billion deal. Will it really fork over multiple billion more dollars for another health care company?

💭 Our thought bubble: Maybe neither Humana nor CVS clinches it, with plenty of large publicly traded hospital companies looking for a value-based care entry point as they lose volume.

  • "They need a feeder engine to drive traffic into their hospitals," and that typically comes in the form of urgent care or primary care, one source says.

Yes, but: Can a health system make it work financially? Catch up fast: Private equity spent a lot of time with Cano before it went public via a $4.4 billion SPAC deal, but now it's much more expensive, and that much trickier for a financial sponsor amid today's turbulent financing markets.

  • Advent International in partnership with Centerbridge Partners; OMERs Private Equity in partnership with OTPP; and Bain Capital were all circling Cano before the surprise SPAC deal, Sarah reported previously.
  • Price talk at the time was in the low $1 billion range, whereas Cano's market cap has surged north of $4 billion after last week's reports of strategic interest.

💭 Our 2nd thought bubble: If you're PE and you hypothetically agreed to acquire Cano — and Humana doesn't top your bid — how do you make it work?

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