December 27, 2017 / 6:35 PM / a year ago

Brigade Capital hedge fund criticizes Humana-Kindred deal

NEW YORK (Reuters) - Hedge fund Brigade Capital Management, a top shareholder in Kindred Healthcare Inc KND.N, said on Wednesday the deal by U.S. health insurer Humana Inc (HUM.N) and two private equity firms to buy Kindred was “disappointing and grossly inadequate.”

Humana, TPG Capital and Welsh, Carson, Anderson & Stowe agreed to buy home healthcare and long-term care operator Kindred on Dec. 19 for about $810 million in cash, or $9 per share. With debt and other costs, they said they were paying about $4 billion for the company.

In a filing with the U.S. Securities and Exchange Commission on Wednesday, Brigade said it had sent a letter to Kindred’s board making the case that the price tag was too low and that it planned to vote against the deal.

Brigade said it had built a 5.8 percent stake in Kindred. That would make it the fifth largest shareholder in the company, according to Thomson Reuters data.

Jeff Jonas, a portfolio manager at Kindred shareholder Gabelli Funds, agreed that the Humana deal undervalues the company and would like to see a higher price.

Still, he noted that a bidding war for Kindred or a drastic price increase from the current bidders was unlikely.

“I think they’ve been shopping the company for quite some time,” Jonas said. “The fact that it took so long and got such a low price probably means there wasn’t a lot of interest.”

Gabelli owned around 1.6 percent of Kindred’s shares and was its 10th largest shareholder at the end of September, according to Thomson Reuters data.

Kindred could not immediately be reached for comment.

The company’s shares, which have traded above $9 since the acquisition was announced, were rose 3.2 percent to $9.70.

The Humana deal would split Kindred into two separate companies: a larger one that focuses on home healthcare and another focused on long-term acute care and rehabilitation.

Reporting by Michael Erman, Editing by Rosalba O'Brien and Richard Chang

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