Humana Inc., one of the largest health insurance companies in the United States, has signed a definitive agreement to sell a majority stake in Kindred at Home’s hospice and personal care businesses to New York-based private equity firm Clayton, Dubilier & Rice (CDR) for $2.8 billion. CDR is acquiring a 60% stake in the Kindred at Home personal care and hospice divisions, and Humana will retain the remaining 40%.
Humana had previously acquired 40% ownership of Kindred in 2018, with the private equity firms Welsh, Carson, Anderson & Stowe (WCAS) and TPG Capital holding the remaining 60%. Last year, Humana bought out the two firms’ shares for $5.7 billion, and quickly announced plans to divest the hospice segment.
The divested segment has an enterprise value of $3.4 million, according to Humana. The $2.8 billion sale price reflects a multiple of 12x the company’s projected 2022 adjusted EBITDA. Humana will apply the proceeds of the transaction, expected to close in the third quarter, for debt repayment and share repurchases.
By selling the hospice segment, Humana is able to capitalize on the record-high valuations in the space. According to a report by PwC’s Health Research Institute, hospice multiples hit a record 26x in 2020.
This marks the 35th Home Health & Hospice transaction of 2022 so far, as well as one of the largest HH&H deals year-to-date, second only to the acquisition of in-home health and hospice care provider LHC Group by Optum, a subsidiary of UnitedHealth Group, for $170 per share, or $5.4 billion in cash. With debt included, that brings the deal’s total to $6 billion.
Kindred is the largest provider of home health services by market share in the United States. Across all three of its service lines, Kindred at Home cares for 550,000 patients in their residences each year, employing nearly 43,000 clinical staff in locations throughout 40 states.
Founded in 1978, Clayton Dubilier & Rice is an American private equity firm that has managed the investment of more than $30 billion in approximately 90 businesses, representing a broad range of industries with an aggregate transaction value in excess of $140 billion. It is one of the oldest private equity investment firms in the world.
