LHC Group Inc. (Nasdaq: LHCG) has already hit a record year for M&A activity.
It added to its streak in a major way on September 8, announcing an agreement to purchase Brookdale Health Care Services agencies in 22 states from the recently formed venture between Brookdale Senior Living Inc. (NYSE: BKD) and HCA Healthcare (NYSE: HCA).
Overall, the Lafayette, Louisiana-based LHC Group will purchase 23 home health locations, 11 hospice agencies and 13 therapy businesses, with all acquired entities maintaining their existing brands.
Geographically, the 23 home health assets stretch from Brookdale Home Health in Lynwood, Washington, to Nurse On Call in Shrewsbury, Massachusetts, with several locations scattered in between.
“This just made sense for all three parties involved,” LHC Group Chairman and CEO Keith Myers told Home Health Care News. “That includes Brookdale. They wanted to have a high-quality home health provider serving their residents, so they can keep their residents healthy and [out of the hospital].”
LHC Group expects to close its deal with the HCA-Brookdale venture in the fourth quarter. Annualized revenue from the purchase is about $146 million, according to the company.
“We will see the full benefit of the revenue and earnings associated with this in 2022,” Myers added.
HCA completed its $400 million deal for Brookdale Health Care Services in July, gaining an 80% ownership stake in the senior living giant’s home health, hospice and outpatient therapy segment.
The Nashville, Tennessee-based HCA is a for-profit operator of health care facilities that has more than 2,000 sites of care nationwide, including 185 hospitals, surgery centers, freestanding ERs and more.
At the time of its deal with HCA, Brookdale — headquartered in nearby Brentwood — had 57 home health locations, 22 hospice agencies and 84 outpatient therapy offices across its footprint.
Strategically, Brookdale leadership decided to sell 80% of its health care services segment to cash in on the strong demand for home health and hospice assets with scale. It also, however, sought a long-term partner that brought more clinical and higher-acuity services to the table for Brookdale residents.
Brookdale, which maintains its stake in the venture with HCA, now adds another national partner in LHC Group, according to President and CEO Cindy Baier.
“We are looking forward to working with LHC Group, another national provider of health care services,” Baier said in the release. “This transaction will further strengthen our liquidity, maintain our 20% interest in the venture with HCA Healthcare, and ensure that high-quality home health and hospice services continue to be available to our residents at communities in these markets. I’m pleased that Brookdale’s residents will benefit from a seamless offering of services across our broad care continuum.”
The M&A market for healthcare companies continues to strengthen in 2021 and ahead of the projected increases in US capital gains taxes. There is unprecedented capital in market, the lowest interest rates in US history and strong acquirer motivations for high quality healthcare companies. Across the continuum of care, buyers and investors are looking for well established, profitable businesses and offering strong valuations and options for management.
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