Brigade Capital Management, a top shareholder in Louisville, Ky.-based Kindred Healthcare, said Wednesday the deal by two private equity firms and Humana to acquire Kindred is "disappointing and grossly inadequate."
Humana, TPG Capital and Welsh, Carson, Anderson & Stowe agreed to buy Kindred for about $810 million in cash, or $9 per share. The total value of the deal is approximately $4.1 billion, including debt and other costs.
Donald E. Morgan III, founder of Brigade Capital Management, shared his disapproval of the deal in a letter to Kindred President and CEO Benjamin Breier.
"From the perspective of maximizing shareholder value, this is a terrible time to sell the company," wrote Mr. Morgan. "This acquisition appears timed to enable the buyers and members of management to (i) take advantage of the negative impact that certain recent (but temporary) events have had on the company's stock price, and at the same time (ii) avoid paying full value for operational enhancements that are in process but not likely to be fully realized until next year."
Mr. Morgan said several initiatives, including the divesture of certain skilled nursing assets and actions to strengthen Kindred's balance sheet, as well as an improved regulatory environment are expected to increase both long-term growth and shareholder value.
Kindred's stock price is positioned to increase, according to Mr. Morgan, and the proposed transaction "does not come close to maximizing shareholder value, is not in the best interests of shareholders and should not be approved by Kindred's owners," he wrote in the letter to Mr. Breier.
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