(Bloomberg) -- Humana Inc. agreed to sell control of a hospice business to buyout firm Clayton Dubilier & Rice for $2.8 billion in cash.
The health insurer will divest a 60% stake in its Kindred at Home unit's hospice and personal-care divisions, it said in a statement Thursday, confirming an earlier Bloomberg News report.
CD&R's purchase values the operations at $3.4 billion including debt, according to the statement. That represents about 12 times this year's forecast adjusted earnings before interest, income taxes, depreciation and amortization. Humana said it plans to use proceeds from the sale for debt repayment and share buybacks.
“The senior population is growing at a pretty incredible rate -- that's putting huge demand on the system,” CD&R Partner Ravi Sachdev said in an interview. “Given all of the labor challenges that are out there and the demand on infrastructure, we think there's a significant opportunity to support Humana in this business and to invest to support that underlying trend.”
The deal comes amid a boom in activity involving home-health and hospice businesses after the Covid pandemic accelerated the trend of people seeking care outside of hospitals. UnitedHealth Group Inc. in March agreed to pay $5.4 billion to acquire home-health provider LHC Group Inc. Last year, Humana bought the slice of home-health company Kindred at Home that it didn't already own from two private-equity partners.
Humana inherited the hospice business as part of that deal. It said at the time it only planned to keep a minority interest in the company's hospice and community-care operations.
The divestment won't have a material impact on 2022 earnings, Humana said. It is expected to close in the third quarter, subject to regulatory approvals, according to Thursday's statement.
Goldman Sachs Group Inc. and Barclays Plc advised Humana on the sale, while CD&R worked with Deutsche Bank AG and UBS Group AG.
“This deal greatly expands choices for patients,” Anand Shah, an operating adviser to CD&R, said in an interview. “When a primary care physician or a specialist that's taking care of a patient is able to coordinate care with hospice, it leads to a successful network effect.
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