Tenet to spin off its Conifer Health

Tenet concludes Conifer strategic review, to complete spin-off by end of 2Q21

Tenet Healthcare (THC) announced its intention to pursue a tax-free spin-off of its Conifer business as a separate, independent publicly traded company.

Tenet to spinoff Conifer Health in a tax free transaction, Stockwinners

The company expects to complete the spin-off by the end of the second quarter of 2021.

This announcement is the culmination of the Conifer strategic review process announced in December 2017.

Ronald A. Rittenmeyer, Executive Chairman and CEO, said, “After an extensive review of Conifer’s strategic alternatives, in which we evaluated multiple options for the business while simultaneously driving significant and sustainable improvements in performance, we are pleased to announce plans to spin off Conifer into a separate, publicly traded company.

This decision supports our longstanding objectives to maximize the value of Conifer, build on its strong growth potential and deliver the best outcome for Conifer and for Tenet shareholders.” Rittenmeyer continued, “Conifer has unmatched experience and scale in offering revenue cycle management solutions for healthcare providers and a proven track record of delivering high-touch, high-value services to clients.

Tenet to spin off Conifer Health, Stockwinners

Pursuing a tax-free spin-off is an important step forward in Conifer’s evolution, and we believe the business is well-positioned to capitalize on its growth opportunities as a standalone company.”

Rittenmeyer added, “We were pleased with Tenet’s performance in the second quarter, with Adjusted EBITDA comfortably within our Outlook range and consistent with consensus estimates.

Volume growth strengthened in our hospital business, with increases in both admissions and adjusted admissions. USPI also delivered favorable volume growth and Conifer had another strong quarter.

We remain excited about the future of our healthcare services offerings at our 65 hospitals and approximately 500 outpatient centers which will remain part of the Tenet enterprise.”

The separation process will include a thorough review of the necessary executive leadership changes, Board membership needs and key commercial milestones that Conifer must achieve in order to provide the optimal governance structures and business foundations for a successful public company.

Specific details about these actions and milestones will be made available in due course.

Among other things, the spin-off will be subject to finalization of the entity structure of the spun-off business, assurance that the separation will be tax-free to Tenet’s shareholders for U.S. federal income tax purposes, executing a restructured services agreement between Conifer and Tenet, finalization of Conifer’s capital structure, the effectiveness of appropriate filings with the Securities and Exchange Commission, final approval from the Tenet Board of Directors, and other customary conditions.

The spin-off will not require a vote by Tenet shareholders and is supported by Common Spirit which owns a minority interest in Conifer Health Solutions, LLC.

The transaction is being targeted for completion by the end of the second quarter of 2021, but there can be no assurance regarding the timeframe for completing the spin-off, the allocation of assets and liabilities between Tenet and Conifer, or that the spin-off will be completed at all.

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 Apollo in talks to acquire LifePoint Health

Apollo in advanced discussions to acquire LifePoint Health

Apollo in advanced discussions to acquire LifePoint Health, Stockwinners
Apollo in advanced discussions to acquire LifePoint Health, Stockwinners

Apollo Global (APO) is in advanced talks to buy LifePoint Health (LPNT), two people familiar with the matter told Reuters on Friday.

The deal could value LifePoint at nearly $6B, including debt, the sources said, adding that Apollo plans to combine LifePoint with RegionalCare Hospital Partners, another regional hospital operator that it owns.

If the negotiations are completed successfully, a deal could be announced as early as next week, the sources said, cautioning that it was possible talks could fail at the last minute. The sources asked not to be identified because the matter is confidential.

Rural healthcare providers such as LifePoint have been challenged in recent years because their reliance on federal insurers such as Medicare and Medicaid has made them particularly vulnerable to changing reimbursement programs. In addition, hospital operating costs have been rising faster than reimbursement rate increases.

Apollo, which raised a $24.6 billion private equity fund last year, acquired RegionalCare in 2015, and merged it with another hospital operator, Capella Healthcare, in 2016.

It would be by far the biggest acquisition for Apollo this year. LifePoint currently has a market capitalization of $1.9 billion and long-term net debt of $2.9 billion.

LPNT closed at $47.90.


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Envision Healthcare sold for $9.9B

Envision Healthcare to be acquired by KKR for approximately $9.9B

 

Envision Healthcare sold for $9.9B, Stockwinners
Envision Healthcare sold for $9.9B, Stockwinners

Envision Healthcare (EVHC) announced it has entered into a definitive agreement to be acquired by global investment firm KKR (KKR) in an all-cash transaction for approximately $9.9B, including the assumption or repayment of debt.

Under the terms of the agreement, which has been unanimously approved by Envision’s Board of Directors, KKR will acquire all of the outstanding shares of Envision’s common stock for $46.00 per share in cash, representing a 32% premium to Envision’s volume-weighted average share price from November 1, 2017, the day immediately following the company’s first announcement that it was reviewing strategic alternatives.

The transaction price represents a multiple of 10.9x trailing 12 months Adjusted EBITDA and 10.1x 2018 anticipated Adjusted EBITDA.

The agreement represents the culmination of the Board’s comprehensive review of strategic alternatives to enhance shareholder value.

During the last seven months, the Board, with the assistance of three independent financial advisors and legal counsel, examined a full range of options to generate shareholder value, including capital structure alternatives, potential acquisitions, portfolio optimization, a potential sale of the whole company, and continued operation as a standalone business.

The Board oversaw an extensive process that involved outreach to 25 potential buyers, including financial sponsors and strategic entities, and invited proposals for all or parts of the business.

After consideration of the opportunities, risks and uncertainties facing the company and the broader sector, as well as the alternatives available to the company, the Board determined that the KKR proposal presented the best opportunity to maximize value for shareholders.

The completion of the transaction, which is targeted for the fourth quarter of 2018, is subject to customary closing conditions and regulatory approvals. Envision intends to present the proposed transaction to its shareholders for approval at the company’s 2018 Annual Meeting, which will be scheduled as soon as practicable following the filing and review of proxy materials.

The company intends to hold its Annual Meeting no later than October 1, 2018.

Upon the completion of the transaction, Envision will become a private company, and its common stock will no longer be traded on the New York Stock Exchange. KKR will be making the investment primarily from its KKR Americas Fund XII.


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Humana, WellCare dive after Cigna buys Express Scripts

Humana, WellCare fall Cigna agrees to buy Express Scripts for $67B

Cigna to acquire Express Scripts for $67B. Stockwinners
Cigna to acquire Express Scripts for $67B. 

Shares of Humana (HUM) and WellCare (WCG) are in the red after Cigna (CI) announced that it has agreed to acquire Express Scripts (ESRX) in a cash and stock transaction valued at about $67B.

Commenting on the news, Piper Jaffray argued that the deal makes it less likely in the near-term that Cigna would buy a Medicaid or Medicare Advantage plan.

EXPRESS SCRIPTS ACQUISITION:

Cigna and Express Scripts announced that they have entered into a definitive agreement whereby Cigna will acquire Express Scripts in a cash and stock transaction valued at approximately $67B, including Cigna’s assumption of approximately $15B in Express Scripts debt. The merger consideration will consist of $48.75 in cash and 0.2434 shares of stock of the combined company per Express Scripts share.

Upon closing of the transaction, Cigna shareholders will own approximately 64% of the combined company and Express Scripts shareholders will own approximately 36%. Upon closing, the combined company will be led by David Cordani as President and CEO. Tim Wentworth will assume the role of President, Express Scripts.

igna to acquire Express Scripts for $67B. Stockwinners
Express Scripts sold for $67B

MEDICAID, MA DEAL LESS LIKELY

Piper Jaffray analyst Sarah #James told investors that she does not foresee any issues with approval, even though a Cigna/Express Scripts combination would increase annual script volume to 848M, making it the third-largest pharmacy benefit manager.

However, the analyst noted that she does not expect Cigna’s script volume to transition over to a combined company until 2023 when its contract with UnitedHealth’s (UNH) OptumRx ends.

Nonetheless, James argued the deal makes it less likely that Cigna will buy a Medicaid or Medicare Advantage plan near-term, consistent with management’s softened language around using M&A to win long-term services and supports, or LTSS, contracts.

Two names that have been seen as potential targets in the sector are Humana and WellCare.

 Humana, WellCare dip after Cigna agrees to buy Express Scripts. Stockwinners
Humana, WellCare dip after Cigna buys Express Scripts 

WHAT’S NOTABLE:

Some Wall Street analysts had previously seen Cigna as a potential takeover target for Amazon (AMZN) as they speculated what the next step would be for the e-commerce giant, especially following its health care venture with Berkshire Hathaway (BRK.A., BRK.B) and JPMorgan (JPM).

 Humana, WellCare dip after Cigna agrees to buy Express Scripts. Stockwinners
Humana, WellCare dip after Cigna agrees to buy Express Scripts

PRICE ACTION

In Thursday’s trading, shares of Cigna have plunged about 9.5% to $175.90, while Express Script’s stock has gained over 11% to $81.63.

Shares of Humana are fractionally down to $272.27, and WellCare’s stock has slipped almost 1% to $193.03.


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Barron’s is bullish on Danaher and GM

Barron’s, the weekly publication owned by the Wall Street Journal, in its latest issue mentions several names:  

Stockwinners offers Barron's review of Stockwinners offers stocks to buy, stocks to watch, upgrades, downgrades, earnings, Stocks to Buy On Margin
Stockwinners offers Barron’s review of stocks to buy, stocks to watch

BULLISH   MENTIONS:

Danaher among more reliable stocks– Danaher’s (DHR) results were met with cries of sell even though they were stellar as ever, sending the shares into negative territory on Monday, Ben Levisohn writes in this week’s edition of Barron’s. Fast-forward to Friday, the stock market was in freefall but the stock weathered the blast, he notes, adding that there is something to be said for Danaher’s consistency. While it will never be the fastest grower, it has grown sales at 4%-5%, quarter after quarter, while cutting costs and improving efficiency to grow earnings, making it one of the more reliable stocks out there, the report says.

General Motors shares could rise more than 35% – General Motors (GM) has been turning in strong profits, which have helped it fund research into autonomous and electric cars, Jack Hough writes in this week’s edition of Barron’s. When Tesla’s (TSLA) stock-market value surpassed General Motors last year, it was big news, but recently the latter has edged back into the top spot, he adds. Selling at just seven times forward earnings, General Motors shares have room to rise more than 35% in the year ahead, Hough contends.

Cisco, Oracle among stocks with rising dividend estimates – Some of the large-cap companies whose dividend estimates for their current fiscal year have increased by at least 2% since July include Cisco (CSCO), Texas Instruments (TXN), UnitedHealth (UNH), Oracle (ORCL), Comcast (CMCSA), 3M (MMM), AbbVie (ABBV), Boeing (BA), Union Pacific (UNP), Bank of America (BAC), Citigroup (C), Wells Fargo (WFC) and JPMorgan (JPM), Lawrence Strauss writes in this week’s edition of Barron’s.

TD Ameritrade adding round-the-clock trading – TD Ameritrade  (AMTD) is offering customers more social media capabilities and has added round-the-clock trading in 12 exchange-traded funds, from Sunday evening through Friday evening using its thinkorswim trading platform or TD Ameritrade Mobile Trader app, Theresa Carey writes in this week’s edition of Barron’s.

Apple, Facebook facing challenges, shares still holding up well – Considering the challenges they face, both Apple (AAPL) and Facebook (FB) shares held up well, Tiernan Ray writes in this week’s edition of Barron’s. Apple offered a forecast for its March quarter that missed expectations, and Wall Street now thinks that the company is reaching a bit too far in pricing the iPhone X at $999-$1150, he notes. Nonetheless, Apple is still an empire very much in control of its destiny, Ray contends. Meanwhile, Facebook said people are spending less time than before on the site, but Mark Zuckerberg calmly assured the Street that he thinks it is a good thing, the report points out.

Cisco, Salesforce among most sustainable companies – Cisco (CSCO) tops Barron’s first annual list of most sustainable companies, followed by Salesforce (CRM), Best Buy (BBY), Intuit (INTU), HP Inc. (HPQ), Texas Instruments (TXN), Microsoft (MSFT), Oshkosh (OSK), Clorox (CLX) and Xylem (XYL).

Spirit Air offers plenty of potential upside – Following a steep decline, shares of Spirit Airlines (SAVE) now trade for less than 12 times forward earnings estimates, a good value or growth play, Brett Arends writes in this week’s edition of Barron’s. Long-term investors may need to be patient because short-term headwinds pop up so frequently for airline stocks, but in return for its risks, Spirit offers reasonable valuations and plenty of potential upside, he argues

BEARISH  MENTIONS:

Musk new compensation package sets wrong targets – Tesla’s  (TSLA) new 10-year compensation package, which considers that Elon Musk could grow the company’s market capitalization from the current $58B to $650B in 2028, is not shareholder-friendly as it emphasizes market cap goals, not sustainable profits, Vito Racanelli writes in this week’s edition of Barron’s.


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Brigade Capital takes stake in Kindred, opposes takeover by Humana

Brigade Capital takes 5.8% stake in Kindred, opposes takeover

Kindred Health sold for $9 a share. Stockwinners
Brigade Capital takes 5.8% stake in Kindred, opposes takeover

Brigade Capital disclosed a 5.8% stake in Kindred Healthcare (KND) and expressed opposition to the company’s proposed buyout by TPG Capital, Welsh, Carson, Anderson & Stowe and Humana (HUM).

Representatives of Brigade intend to engage in discussions with Kindred’s management and board regarding, among other things, the company’s strategic alternatives and direction, and strategies to enhance shareholder value, including regarding the recently announced proposed acquisition.

On December 27, Brigade delivered a letter to the board stating its opposition to the takeover and noting the “material inadequacy of the terms of the proposed transaction.”

Brigade’s belief is that the $9.00 per share cash merger price “significantly undervalues” Kindred’s common stock. The Letter notes that from the perspective of maximizing shareholder value, Brigade believes it is premature for Kindred to engage in a sale transaction.

Over the past year, Brigade noted that the company “has overcome numerous challenges and calmed most of the headwinds against its business, positioning it for substantial stock price appreciation in 2018 and beyond.”

The activist added, “Brigade expected management to continue operating the business to enable the shareholders who have patiently supported the Issuer throughout its challenges to realize the benefits of the business improvements through their continued ownership in the going concern.

Instead, Brigade stated in the Letter, that it believes management has chosen to pursue a transaction with the Consortium that severely undervalues the Issuer and ensures that the Consortium – rather than existing shareholders – will reap the benefits of the value enhancement the improved business is expected to generate.

For these and the reasons stated in the Letter, Brigade advised the Issuer that it does not believe the proposed transaction is in the best interests of the Issuer’s shareholders and intends to actively oppose it.”

BACKGROUND

On December 19th,  Kindred Healthcare (KND) announced that its Board of Directors has approved a definitive agreement under which it will be acquired by a consortium of three companies: TPG Capital, Welsh, Carson, Anderson & Stowe and Humana (HUM) for approximately $4.1B in cash including the assumption or repayment of net debt.

Under the terms of the agreement, Kindred stockholders would receive $9.00 in cash for each share of Kindred common stock they hold, representing a premium of approximately 27% to Kindred’s 90-day volume weighted average price for the period ending December 15, 2017, the last trading day prior to media reports regarding the potential transaction.

KND last traded at $9.42, two cents up on the day.


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DaVita sold or $4.9 billion

Optum to acquire DaVita Medical Group for approximately $4.9B in cash

 Optum to acquire DaVita Medical Group for approximately $4.9B in cash. See Stockwinners.com
Optum to acquire DaVita Medical Group for approximately $4.9B in cash

Optum, part of UnitedHealth Group (UNH), and DaVita Medical Group, a subsidiary of DaVita (DVA), are combining.

The agreement, entered into on December 5, calls for Optum to acquire DaVita Medical Group for approximately $4.9B in cash.

The transaction is expected to close in 2018 and is subject to regulatory approval and other customary closing conditions.

Following the transaction, DaVita Medical Group will become part of Optum’s OptumCare division, which works with more than 80 health plans to serve millions of consumers annually through 30,000 affiliated physicians and hundreds of care facilities.

DaVita’s medical unit had been a significant drag on the company’s financial performance in recent quarters.

The company said it would use the proceeds from the sale for stock buybacks after the deal closes next year, and to repay debt.

Joe Mello, COO of DaVita Medical Group, will continue in a leadership role in the combined entity, as will the DaVita Medical Group leadership team.

DaVita plans to use the proceeds from the transaction for significant stock repurchases over the one to two years following the closing of the transaction, as well as to repay debt and for general corporate purposes.

DVA closed at $60.93. It last traded at $68.29.


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Nvidia’s AI to be used by GE Healthcare

GE, Nvidia join forces to accelerate AI adoption in healthcare

Nvidia pullback after Q2 beat a buying opportunity. See Stockwinners.com Market Radar for more
Nvidia’s AI chips to be used by GE Healthcare

GE Healthcare (GE) and Nvidia (NVDA) announced they will deepen their 10-year partnership to bring the most sophisticated artificial intelligence to GE Healthcare’s 500,000 imaging devices globally and accelerate the speed at which healthcare data can be processed.

The scope of the partnership, detailed at the 103rd annual meeting of the Radiological Society of North America, includes the announcement of the new Nvidia-powered Revolution Frontier CT, advancements to the Vivid E95 4D Ultrasound and development of GE Healthcare’s Applied Intelligence analytics platform.

The new CT system in the Revolution Family is two times faster in imaging processing than its predecessor, due to its use of Nvidia’s AI computing platform.

The Revolution Frontier is FDA cleared and expected to deliver better clinical outcomes in liver lesion detection and kidney lesion characterization because of its speed – potentially reducing the need for unnecessary follow-ups, benefitting patients with compromised renal function and reducing non-interpretable scans with Gemstone Spectral Imaging Metal Artefact Reduction.

The new CT system in the Revolution Family is two times faster in imaging processing than its predecessor, due to its use of NVIDIA’s AI computing platform.

NVIDIA, which has helped pioneer the spread of AI across a growing range of fields, including self-driving cars, robotics and video analytics, is working with GE Healthcare to spread its application in healthcare.

GPU-accelerated deep learning solutions can be used to design more sophisticated neural networks for healthcare and medical applications—from real-time medical condition assessment to point-of-care interventions to predictive analytics for clinical decision-making.

For patients, the partnership aims to drive lower radiation doses, faster exam times and higher quality medical imaging.

NVDA closed at $216.96. GE closed at $18.19.


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Cerner and Amazon to announce a deal next week

Amazon to announce ‘huge healthcare deal’ with Cerner, CNBC says

 

AWS and CERNER to announce major deal. See Stockwinners.com for details

Shares of Cerner (CERN) are up 4.5% to $69.75 after CNBC, citing sources, reported that Amazon Web Services (AMZN) CEO Andy Jassy plans to announce next week that the company is teaming up with Cerner to help health-care providers better use their data.

Cerner Corporation designs, develops, markets, installs, hosts, and supports health care information technology, health care devices, hardware, and content solutions for health care organizations and consumers in the United States and internationally.

ANALYST COMMENTS

Stifel analyst David #Grossman noted that such an agreement would allow Cerner to leverage AWS’ global reach and technology to scale this business, which is still relatively small but is perceived to be one of the more important and faster growing industry segments, Grossman tells investors.

A “much more significant opportunity” would be for Cerner to reduce implementation times and reduce the capital intensity of its business by partnering with a hyperscale cloud provider, like Amazon, added Grossman, who keeps a Hold rating on Cerner shares.

RBC Capital analyst George #Hill commented that he thinks the deal would give the company even more credibility when trying to sell its outsourcing or hosting services to large health system clients.

The analyst, who doesn’t see Amazon getting into the provider interface business near to medium term, doesn’t view the deal as a meaningful threat to Cerner, he adds. Hill maintains an Outperform rating and $74 price target on Cerner shares.

Piper Jaffray analyst Sean #Wieland says that if they can overcome patient privacy risks, the partnership will be complementary and synergistic. Further, the analyst believes the deal would also validate Cerner as a market leader in Electronic Health Records. Wieland reiterates an Overweight rating and $70 price target on Cerner‘s shares.

OTHERS TO WATCH

Shares of athenahealth (ATHN) initially dropped after CNBC said Cerner (CERN) will be teaming up with Amazon Web Services (AWS) to help health-care providers better use their data, but the stock has recovered to briefly move back into positive territory following the headlines.


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Merit Medical goes shopping

Merit Medical to purchase Becton Dickinson assets for $100M 

Merit Medical goes shopping. See Stockwinners.com for details

Merit Medical (MMSI) has signed an asset purchase agreement with Becton, Dickinson (BDX) to acquire certain assets which BD proposes to sell in connection with its proposed acquisition of C.R. Bard.

Merit’s proposed asset acquisition is subject to the closing of BD’s proposed acquisition of Bard as well as other usual and customary closing conditions.

The assets to be acquired are soft tissue core needle biopsy products currently sold by BD under the trade names of Achieve Programmable Automatic Biopsy System, Temno Biopsy System and Tru-Cut Biopsy Needles.

Additionally, Merit proposes to acquire the Aspira Pleural Effusion Drainage Kits and the Aspira Peritoneal Drainage System currently marketed by Bard.

The purchase price for the product lines and related assets to be acquired is $100M, subject to adjustment for fluctuations in the value of transferred inventory. Merit intends to finance the acquisition at closing through borrowings which are currently available under its revolving credit facility.

After giving effect to the proposed transaction, Merit anticipates its debt to adjusted EBITDA will increase from approximately 2.20 to approximately 2.70.

This transaction is expected to be accretive to both GAAP and non-GAAP earnings in 2018. Merit’s management expects the acquisition to provide incremental annual revenues in the range of $42M-$48M, adjusted gross margins for the subject product lines in the range of 60-70%, and, over a period of six to twelve months, to be accretive by 50-120 basis points to Merit’s adjusted gross margins.

The transaction is also expected to expand operating margins and increase cash flow. Merit’s management expects the acquisition to provide 10c-19c in adjusted non-GAAP EPS accretion in FY18.


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Almost Family and LHC Group merge

LHC Group, Almost Family to combine in an all-stock merger of equals transaction

LHC Group (LHCG) and Almost Family (AFAM) announced today that they have agreed to combine in an all-stock merger of equals transaction pursuant to a definitive merger agreement unanimously approved by the Boards of Directors of each company.

The merger will create a nationwide provider of in-home healthcare services with a long track record of successfully partnering with hospitals and health systems led by the most experienced management team steeped in home health.

The combined company will have 781 locations in 36 states with more than 31,000 employees and revenue of $1.8 billion and Adjusted EBITDA of approximately $145 million for the trailing 12-month period ended September 30, 2017.

Under terms of the transaction, Almost Family shareholders will receive 0.9150 shares of LHC Group for each existing Almost Family share. Upon closing of the transaction, LHC Group shareholders will own 58.5% and Almost Family shareholders will own 41.5% of the combined company.

The stock issuance in the merger is expected to be tax-free to shareholders of both companies.

The transaction, which is expected to be completed in the first half of 2018, is subject to the receipt of regulatory approvals and other customary closing conditions as well as the approval of shareholders of both LHC Group and Almost Family.

The combined company will continue to trade on NASDAQ under the ticker symbol, “LHCG.” William Yarmuth, current chairman and chief executive officer of Almost Family, will remain as a special advisor to the combined company, while Steve Guenthner, current president and principal financial officer of Almost Family, will be named chief strategy officer.

Keith Myers, current chairman and chief executive officer of LHC Group, will be named chairman and chief executive officer of the combined company, while Donald Stelly will be named president and chief operating officer and Joshua Proffitt will be named chief financial officer.

The Board of Directors will be comprised of ten members, six of which (including Mr. Myers and Lead Independent Director Billy Tauzin) will be current LHC Group directors and four of which will be Almost Family directors.

The combined companies’ Home Office will remain in Lafayette, La., and Personal Care Services, Healthcare Innovations and other support services will continue to operate out of Louisville, Ky.


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Envision Healthcare could be sold

Envision rises amid report of private equity interest

Envision Healthcare could be sold. See Stockwinners.com for more

Shares of Envision Healthcare (EVHC) are on the rise following a report by Bloomberg claiming the company has attracted buyout interest from private equity investors.

The hospital based physician group, which activist Starboard Value has targeted, had previously announced that it was exploring options to enhance shareholder value.

Meanwhile, Baird analyst Whit Mayo told investors that Envision could be worth in the area of $40 per share in a leveraged buyout, which is an estimated value that his peer at Keybanc also sees as possible.

PRIVATE EQUITY INTEREST

According to a report by Bloomberg, Envision has attracted buyout interest from firms including Carlyle Group (CG) and Onex Corp.

The two are among companies that may bid for Envision alone or as part of a group, the report added.

The health-services provider has been under pressure from activist investor Starboard Value, who revealed a stake in Envision in October and recommended the company as an attractive takeover target, Bloomberg noted.

LBO ‘DOABLE’

In a research note to investors published prior to the release of Bloomberg’s report, Baird‘s Mayo noted that he would guess that about three to four hedge funds now collectively own about 20% of Envision Healthcare, with “potentially more in the shadows,” and that a leveraged buyout is “very doable” if one believes there is an investment case for industry volumes.

If there is a case seen for structural changes in volumes, cash collections and/or physician rate, Mayo sees the potential for “very acceptable returns” on a theoretical leveraged buyout in the $40 per share area, he contended.

#Mayo pointed out that he thinks the upside risk of a leveraged buyout is being “underappreciated,” and reiterated an Outperform rating and $35 price target on the shares.

Meanwhile, KeyBanc analyst Jason #Gurda told investors in a research note of his own that he also believes a private equity buyer could reasonably bid “in the low $40s” for Envision in a leveraged buyout.

The analyst noted that he was not surprised to hear of reports that there is private equity interest in the company as in the past there has been a considerable level of private equity investment in both of Envision’s business segments – physician services and ambulatory surgical centers. Gurda reiterated an Overweight rating on the stock, while raising his price target on the shares to $40 from $37.

PRICE ACTION

In Tuesday’s trading, shares of Envision have jumped about 7% to $27.66. Year-to-date, however, the stock is still down over 56%.


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“Home Health Stocks” higher on CMS decision

Amedisys, peers jump after CMS pushes out home health group model changes

 Amedisys, peers jump after CMS pushes out home health group model changes . See Stockwinners.com for details

Shares of Amedisys (AMED) are on the rise after the Centers for Medicare & Medicaid Services announced it is not finalizing the Home Health Groupings Model and “will take additional time to further engage with stakeholders to move towards a system that shifts the focus from volume of services to a more patient-centered model.”

Following the announcement, Mizuho upgraded Amedisys and HealthSouth (HLS) to Buy.

Additionally, both Almost Family (AFAM) and LHC Group (LHCG) are higher following the CMS’ update.

PAYMENT RATES, HHGM UPDATE

Last night, the Centers for Medicare & Medicaid Services issued a final rule that updates the 2018 Medicare payment rates and the wage index for home health agencies serving Medicare beneficiaries.

The rule also finalizes proposals for the Home Health Value-Based Purchasing Model and the Home Health Quality Reporting Program.

It added, “CMS is not finalizing the Home Health Groupings Model and will take additional time to further engage with stakeholders to move towards a system that shifts the focus from volume of services to a more patient-centered model.

CMS will take the comments submitted on the proposed rule into further consideration regarding patients’ needs that strikes the right balance in putting patients first.” CMS projects that Medicare payments to HHAs in 2018 will be reduced by 0.4%, or $80M, based on the finalized policies.

BUY AMEDISYS, HEALTHSOUTH

Commenting on CMS’ decision to take the public comments about Home Health Groupings Model under further consideration, Mizuho analyst Sheryl Skolnick upgraded Amedisys and HealthSouth to Buy from Neutral.

The analyst told investors that she is “even more convinced” that Home Health Groupings Model is not likely to be reintroduced for some time, clearing the way for 2018 and probably 2019 to be normal years.

#Skolnick expects Amedisys shares to have strong positive follow through and has increased confidence in 40% EBITDA growth year-over-year. Meanwhile, the analyst noted that she also has increased confidence in HealthSouth’s execution and free cash flow generation.

HOME HEALTH STOCKS RALLY

Also commenting on the update, Jefferies analyst Brian Tanquilut told investors in a research note of his own that the CMS’ decision to indefinitely postpone the implementation of the Home Health Groupings Model is a positive for the home nursing industry.

Further, the analyst argued that given the steep selloff in Almost Family, Amedisys and LHC Group since the release of the proposed rule, all three stocks should recover lost valuation. He believes the postponement of the Home Health Groupings Model “significantly reduces the risk of irrational rate cuts.” Tanquilut, who believes sector fundamentals are among the best across the HC Services landscape, has Buy ratings on all three stocks.

PRICE ACTION

In morning trading, shares of Amedisys have jumped almost 17% to $54.29, while HealthSouth’s stock has gained 8% to $48.83. Shares of Almost Family have also jumped more than 26% to $51.05, and LHC Group’s stock has advanced about 9% to $70.96.


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CVS offers to buy Aetna

CVS offers $200 per share for Aetna

CVS offers $200 per share for Aetna. See Stockwinners.com for details

CVS Health Corp (CVS) has made an offer to acquire No. 3 U.S. health insurer Aetna Inc. (AET) for more than $200 per share, or over $66 billion, according to the Wall Street Journal.

Pharmacy benefit managers (PBMs) such as CVS negotiate drug benefits for health insurance plans and employers, and have in recent years taken an increasingly aggressive stance in price negotiations with drugmakers.

They often extract discounts and after-market rebates from drugmakers in exchange for including their medicines in PBM formularies with low co-payments.

A tie-up with Aetna could give CVS more leverage in its price negotiations with drug makers. But it would also subject it to more antitrust scrutiny.

ANALYST  COMMENTS

Citi sees possible CVS, Aetna deal as both ‘evolutionary and revolutionary’ – Citi analyst Alvin Concepcion says that based on CVS Health’s (CVS) acquisitions of Caremark and Omnicare, a takeover of Aetna (AET) “could be in bounds.” The potential deal is both “evolutionary and revolutionary” given the push toward consumerism in healthcare, challenged retail backdrop, and need to combat looming competition from Amazon.com (AMZN), Concepcion tells investors in a research note after the Wall Street Journal reported the two companies are in talks. The analyst estimates the deal could be 24c accretive to CVS in year one with greater upside over time. He has a Neutral rating on CVS shares with an $87 price target.

JPMorgan views potential Aetna deal as strategic positive for CVS – An acquisition of Aetna (AET) would be positive for CVS Health (CVS) from a strategic standpoint, JPMorgan analyst Lisa Gill tells investors in a research note after the Wall Street Journal’s report of the deal talks. A scaled integrated health insurer/pharmacy benefits manager model already exists in the marketplace today and has proven to be a strong competitor, which lowers potential risk, Gill writes. Further, she does not expect a competing bidder to emerge for Aetna given the size of both companies. The analyst has an Overweight rating on CVS with a $97 price target.

Piper says valuation and timing make sense for CVS, Aetna deal – The motivation, timing, and valuation make sense for a CVS Health (CVS) acquisition of Aetna (AET), Piper Jaffray analyst Sarah James tells investors in a research note. Aetna was likely not pleased with sharing its “best in class” pharmacy pricing with one of its biggest competitors, and reported talks of CVS potentially acquiring Aetna could be part of a retention strategy, James contends. She notes the Wall Street Journal’s report of the deal talks follow Anthem (ANTM), Express Scripts’ (ESRX) largest customer, opting to leave the pharmacy benefits manager in 2019 for CVS, whose largest customer is Aetna. James puts a potential acquisition valuation for Aetna in the $65B-$69B range.

CVS Health potential deal with Aetna not compelling in short term, says Loop – Loop Capital analyst Andrew Wolf maintained a Hold rating on CVS Health (CVS), saying the potential acquisition of Aetna (AET) by CVS that was reported by the Wall Street Journal would not be compelling in the near term, as it would be neutral to CVS’s 2018 earnings per share. The deal would require more debt financing or greater synergies than Wolf assumed to be meaningfully accretive, which Wolf does view as likely over a longer time frame.

CVS-Aetna deal makes sense, but risk/reward a concern, says Cowen – Cowen analyst Charles Rhyee said he sees the merits to a CVS Health (CVS) deal to buy Aetna (AET), which is reported to be discussed by the companies, but he is concerned by the possibly high risk/reward. He sees near-term synergies but the grander long-term vision of coordinated care is many years out, creating risk to the shares in the near to medium-term. Ryhee maintained his Outperform rating and $86 price target on CVS Health shares.

CVS Health potential deal to buy Aetna makes sense, says Needham – Needham analyst Kevin Caliendo, who has a Hold rating on CVS Health shares, said the potential acquisition of Aetna (AET) by CVS Health (CVS) that was reported Thursday by the Wall Street Journal makes sense, and Caliendo does not see any other possible bidders. Caliendo would view the acquisition as strategic instead of financial, as it would create a healthcare “powerhouse” that could lower costs through negotiating leverage with manufacturers.

Aetna downgraded to Neutral from Overweight at Cantor Fitzgerald.

OTHERS TO WATCH

Shares of Anthem (ANTM), Cigna (CI), Humana (HUM), and UnitedHealth (UNH) should see some interest today.

PRICE ACTION

AET jumped 11% following the news. It last traded at $178.60. It has a 52-weeks trading range of $104.59 – $184.98. CVS closed at $73.31. It has a 52-weeks trading range of $69.30 – $85.49.


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UK court rules in favor of Mylan over Teva

Mylan wins UK court ruling related to Copaxone 40 mg/mL patent

UK court votes in favor of Mylan over Teva. See Stockwinners.com for details

Mylan N.V. (MYL) announced that the United Kingdom’s High Court of Justice has issued a decision in favor of Mylan and its European partner Synthon, finding all claims of Teva’s (TEVA) patent EP (UK) 2 949 335 (EP 335) relating to Copaxone 40 mg/mL invalid based on obviousness.

This victory is yet another important milestone for Mylan, and this U.K. court decision only further increases Mylan’s confidence in its ability to bring high quality, lower-cost generic versions of Copaxone to the multiple sclerosis community and patients around the world.

Over the course of the last eight years, Mylan has successfully overcome Teva’s four waves of U.S. patent litigation, eight Citizen Petitions, injunction proceedings in India, more than 15 regulatory challenges, patent litigations or commercial actions across Europe, and now the litigation in the U.K., in addition to obtaining dismissal of Teva’s suit against the FDA seeking to delay approval of the 20 mg/mL product.

Today’s positive ruling in the U.K. will further help pave the way for Mylan’s future launches of Glatiramer Acetate Injection 40 mg/mL in certain European markets.

In addition, Mylan recently learned of Teva’s latest action with the filing of an infringement action against Mylan’s Irish subsidiary Mylan Teoranta in the High Court of Ireland alleging that Mylan’s Glatiramer Acetate 40 mg/mL injection infringes two European patents.

In fact, one of those patents is the same patent that was just invalidated today by the U.K. High Court of Justice and the counterpart to a U.S. patent that was previously held invalid by both the United States District Court for the District of Delaware and the Patent Trial and Appeal Board. Mylan will support the multiple sclerosis patient population through its continued commitment to bring lower-cost generic versions of Copaxone around the world regardless of any further attempts by Teva to deny such access.

MYL closed at $39.02. TEVA closed at $13.94.


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