WSJ: Humana in 'advanced talks' with private firms to buy Kindred Healthcare

Kindred Healthcare's headquarters building in downtown Louisville.

LOUISVILLE, Ky. (WDRB) -- Kindred Healthcare, one of Louisville’s largest public companies, will be sold and broken up in a deal that involves another Louisville-based healthcare giant, Humana Inc.

Kindred, which has been publicly traded since 2001, will be split into a pair of private companies in a deal valued at $4.1 billion, including the assumption of Kindred’s $3.3 billion in debt.

The combination of two of Louisville's biggest public companies will be good for the city and help cement its status a hub for businesses involved in caring for the nation's growing elderly population, the top executives of Humana and Kindred told reporters in a conference call Tuesday.

"As good as this transaction is strategically … it’s really good for the city as well and for employment and for continued professional development and for our continued focus … about becoming an urban leader of senior living in America," Kindred CEO Ben Breier said.

The buyout values Kindred at about $9 a share, which is small premium over Kindred’s $8.60 closing price on Friday, before the Wall Street Journal first reported details of the deal.

Humana will pay $800 million in cash for a 40 percent stake in one of the new companies, Kindred at Home, which is Kindred’s home health and hospice business.

Private equity firms TPG Capital and Welsh, Carson, Anderson & Stowe will own the other 60 percent of Kindred at Home for at least three years, after which Humana plans to buy them out and take full ownership of Kindred at Home, Humana CEO Bruce Broussard told reporters on Tuesday.

The private equity firms will also own all of the surviving Kindred Healthcare, a specialty hospital company that includes Kindred’s long-term acute hospitals, inpatient rehab facilities and contract rehab services.

Breier will continue to lead Kindred Healthcare after the deal closes next summer. Kindred executive vice president David Causby, the president of Kindred at Home, will serve as the CEO of Kindred at Home following the closing.

Breier and Broussard said they expect minimal impact on employment in Louisville, where Kindred has about 1,200 corporate workers.

"The city of Louisville really shouldn’t see a substantive change in our employment totals," Breier said.  

He added that Kindred at Home is mostly based in Atlanta -- the location of Gentiva Health Services, which Kindred bought in 2015 -- with some "support services" in Kansas City.

Kindred is nearly finished with a $40 million second headquarters building at its corporate campus on S. 4th Street at Broadway.

Breier said the surviving specialty hospital company called Kindred Healthcare will still be "very sizable" and a "vibrant part of the community."

"Our current thoughts and plans are that these buildings are going to continue to be used in a very meaningful way and that will continue to be a really important contributor to the Louisville economy,” Breier said.

In-home care important to Humana

Humana sees Kindred at Home as a way to boost its main business, Medicare Advantage.

Humana gets fixed payments from the government’s Medicare program to provide insurance coverage to seniors, and home healthcare is a key way to reduce costs and improve outcomes, executives have said.

“We see the home as the way of delivering care in the future in a much deeper way," Broussard said Tuesday. 

Sixty-five percent of Kindred at Home’s footprint overlaps with Humana’s Medicare Advantage markets, the companies said.

Though Humana's main business is health insurance, the company has made forays into the healthcare provider space before as part of its "integrated care delivery" strategy. 

In 2010 Humana bought Concentra, a national provider of occupational health, urgent care and physical therapy, but Humana sold that business in 2015. At the time, Humana said Concentra was focused on occupational injuries, while primary care was more important to its integrated care strategy.

Could Humana still be takeover target?

Humana itself has been the subject of takeover speculation after its plan to sell to health insurance rival Aetna fell apart earlier this year.

Aetna now plans to be acquired by CVS Health Corp. in a $69 billion deal announced earlier this month.

Ana Gupte, an analyst with Leerink Partners, said in a note to clients Monday that a potential acquisition of Kindred’s home health business would not preclude a possible sale of Humana. The Kindred deal is “small” for Humana, she said.

With about $2.5 billion in annual revenue, Kindred at Home would be a modest boost to Humana’s business, which is on track to generate about $54 billion in revenue this year.

Broussard would not directly answer a question Tuesday about whether Humana could entertain takeover offers while the Kindred deal is pending.

But the acquisition of Kindred at Home doesn't signal any big change in Humana's strategy, he said. 

If someone is interested in the organization I think this continues to further our strategic direction and is not counter to what we have communicated in the past. We, throughout the year, have been communicating that home (health care) has been an important part of our strategy following the Aetna break. So if they were interested in us before and the strategy that we articulated, then my suspicion is they will continue to be interested in the organization. That being said, we remain excited about our independent status. We remain committed to our strategy direction of the integrated care model," Broussard said

Reach reporter Chris Otts at 502-585-0822,, on Twitter or on Facebook. Copyright 2017 WDRB News. All rights reserved.