Saturday, January 13, 2018

When Strategy Fails, Sellout


Strange Tony,

It's hard to see Kindred's planned sale to Humana, two private equity firms and a Canadian pension as anything but a move to enrich a failed executive team.  Humana will own 40% of the home health, hospice and community care company (old Gentiva plus Integracare) but is not in deal for LTAC and rehab hospitals/contract outpatient rehab services..

Enrich - Senior executives will do very well via change in control compensation.  Those that remain will become partners with Kindred's new owners.

Moody's estimated Kindred to have $250 million in cash as of the end of 2017.  If the deal were done today netting out cash would take the $810 million purchase price down to $560 million.  I expect executives and the board to use a good chunk of that cash to handsomely reward themselves between now and the closing date.

Failed - Kindred Healthcare's board is selling its pieces and parts at fire sale prices. The company went on a purchasing spree in 2014.  Audited financial statements for that year show equity at nearly $1.5 billion.   Two months later Kindred paid $700 million in cash as part of its $1.8 billion Gentiva buyout.

Executives drove down the value of the company from $1.7 billion (equity at end of 2016) to a mere $810 million (the buyout price).

Kindred President Ben Breier called employees "partners" in the Q3 earnings call, but there is no evidence the company considers us anything more than "hands."  Raises have been absent.  The retirement match is minuscule and employees have no opportunity to buy company stock without a brokerage fee, a benefit common in many publicly traded companies.

A number of high profile employers gave both raises and bonuses after Congress passed tax reform.  Will executives send just a smidgen to the hardworking caregivers down the chain of command?  Some are in need of crumbs from the King's table.

Anonymous (in ever shrinking Kindred)

1 comment:

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