Arex Capital pushes Enhabit to consider sale
Illustration: Sarah Grillo/Axios
Hedge fund Arex Capital Management is pushing home health and hospice business Enhabit to launch a strategic review and explore a sale, Reuters reports.
Why it matters: Enhabit is one of the last publicly-traded companies focused specifically on home health.
Details: Enhabit is interviewing two board directors put forward by Arex, which currently owns a 4.5% stake in the company.
- Since being spun off from post-acute healthcare services provider Encompass Health in July 2022, Enhabit's share price has dropped nearly 50%.
- The company is currently trading at $12.49 per share, for a market capitalization of about $620 million.
- Enhabit could fetch a "potential sale price range of $30-$40 per share, more than triple Enhabit's current share price," Arex said in a letter viewed by Reuters.
- Arex wants Enhabit to commit to starting a strategic review before the end of the year, as well as close any potential transaction following the two-year anniversary of the spinoff to avoid tax complications.
Zoom in: UnitedHealth in particular has been an acquisitive strategic in home health, buying LHC Group for $5.4 billion in February.
- The payor then set its sights on Amedysis, which had agreed to sell to Option Care Health for $3.6 billion in May — only to receive a surprise $3.26 billion all-cash offer from UnitedHealth a month later.
- CVS also made a significant move, closing an $8 billion acquisition of home assessments business Signify Health in March.
The big picture: Dealmaking in home health has been down this year, amid rising interest rates, wage pressures and the ending of the public health emergency.
Of note: With the implementation of the SEC's universal proxy card, activist investors have seen their success rate improve.
- One win is already making an impact. Activist Carl Icahn nominated for three dissident seats on Illumina's board, and won one — a seat that ousted the $32 billion DNA sequencing company's chairman.
💠Our thought bubble: As the chessboard of the home health industry shifts, so too does the buyer universe for smaller, private equity-backed home health businesses looking to exit.
Enhabit did not respond to a request for comment.
