Humana, pair of private equity firms will buy Kindred Healthcare for $4.1B

handshake / shaking hands
News of Humana’s purchase of part of Kindred Healthcare comes on the heels of speculation that the insurer is preparing to be acquired itself. (Getty/daizuoxin)

It’s official: Humana and two private equity firms will purchase Kindred Healthcare in a deal valued at about $4.1 billion.

Kindred made the announcement on Tuesday, not long after news had surfaced that the companies were in advanced discussions about the transaction.

As part of the deal, Kindred will spin off into two separate entities. One will be a standalone company composed of Kindred’s home health, hospice and community care businesses, which will be owned 40% by Humana and 60% by TPG Capital and Welsh, Carson, Anderson & Stowe. Over time, Humana will have the option of buying the remaining ownership in the company, which will be called Kindred at Home.

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The other spinoff will be a specialty hospital company owned by the two private equity firms. The new company, called Kindred Healthcare, will include long-term acute care hospitals, inpatient rehabilitation facilities and contract rehabilitation services businesses and will be “uniquely positioned to care for the most medically complex and rehab-intensive populations,” Kindred President and CEO Benjamin Breier said in a statement.

For Humana, the deal “underscores the successful and ongoing execution of our strategy by joining with the most geographically diverse home healthcare provider in the country,” CEO Bruce Broussard said. Indeed, the insurer’s Humana At Home division already offers services like skilled nursing and in-home support to 1 million people.

“We are confident that these new capabilities will help Humana continue to modernize home health and meaningfully improve the member and provider experience,” Broussard added.

Per the terms of the deal, Breier will be the CEO of the specialty hospital company, while David Causby, who is the current president and executive vice president of Kindred at Home, will be the CEO of that entity when it becomes a standalone company. The transaction is expected to close next summer, provided it secures the necessary approvals from shareholders and regulators.

News of Humana’s purchase comes on the heels of speculation that the insurer is preparing to be acquired itself—possibly by fellow insurer Cigna. Such a deal could still happen, especially since UnitedHealth’s market dominance and CVS’ pending purchase of Aetna will put pressure on other insurers to grow larger and more diversified.