Humana sells majority stake in hospice business in $3.4bn deal

BY Fraser Tennant

In a transaction which gives it a strategic minority interest, US health insurance company Humana Inc. is to sell a majority stake in the hospice and personal care divisions of its Kindred at Home (KAH) unit to private investment firm Clayton, Dubilier & Rice (CD&R).

Under the terms of the definitive agreement, Humana will divest a 60 percent interest in KAH Hospice and receive cash proceeds of approximately $2.8bn, reflecting an enterprise valuation of $3.4bn. Humana intends to use proceeds from the transaction for the repayment of debt and share repurchases.

Upon closing of the transaction, Humana’s hospice and personal care divisions will be restructured into a standalone operation. These divisions include patient-centred services for hospice, palliative, community and personal care. The company had previously indicated its intent to divest a majority stake in these non-core businesses when it acquired the remaining interest in Kindred at Home in April 2021.

“While palliative and hospice services are important components in the continuum of care that Humana offers patients, we are confident that we can deliver desired patient outcomes and improved customer experiences through partnership models rather than fully owning KAH Hospice,” said Susan Diamond, chief financial officer of Humana. “We explored a broad range of alternatives and believe this transaction best allows Humana to divest majority ownership of these non-core businesses today, while still maintaining a strategic minority interest through our remaining stake.”

The transaction is expected to close in the third quarter of 2022 and is subject to customary state and federal regulatory approvals.

Ms Diamond continued: “With CD&R’s established physician relationships, value-based care expertise, and record of providing strategic capital to a wide range of businesses, we are certain that these divisions are well-positioned for success under the joint ownership of Humana and CD&R.”

A private investment firm with a strategy predicated on building stronger, more profitable businesses, since its inception CD&R has managed the investment of approximately $40bn in more than 100 companies with an aggregate transaction value of more than $175bn.

David Causby, president and chief executive of KAH’s hospice and personal care divisions, concluded: “We are excited by the new strategic partnership structure with Humana and look forward to working closely with CD&R to pursue growth that is centred on improved access, equity and quality of care across an expanded group of patients.”

News: Humana to sell majority stake in hospice business to CD&R for $2.8 billion

Blackstone acquires ACC in $12.8bn transaction

BY Fraser Tennant

In a transaction valued at $12.8bn, global investment business Blackstone Inc. is to acquire American Campus Communities (ACC), the largest developer, owner and manager of high-quality student housing communities in the US.

Under the terms of the definitive agreement, Blackstone will acquire all outstanding shares of common stock of ACC for $65.47 per fully diluted share in an all-cash transaction, including the assumption of debt.

ACC’s portfolio comprises 166 owned properties in 71 leading university markets, including Arizona State University, the University of Texas, Florida State University and the University of California, among many others. Moreover, ACC’s properties are high-quality, purpose-built student housing assets located within walking distance of their respective university campuses, with approximately 24 percent of ACC’s communities located on campus.

“Through our initial public offering (IPO), 18 years ago, we began our pioneering quest to transform the student housing sector into a mainstream, institutional asset class within the commercial real estate sector,” said Bill Bayless, co-founder and chief executive of American Campus Communities. “We have certainly accomplished that mission and are proud and excited to have our best-in-class company join Blackstone, the world’s largest alternative asset manager.”

A global leader in real estate investing, Blackstone’s real estate business was founded in 1991 and has $279bn of investor capital under management. The firm is the largest owner of commercial real estate globally, owning and operating assets across every major geography and sector, including logistics, residential, office, hospitality and retail.  

“ACC has a best-in-class portfolio and platform, built on longstanding relationships with some of the most distinguished and fastest growing universities in the country,” said Jacob Werner, co-head of Americas Acquisitions for Blackstone Real Estate. “Our capital will enable ACC to invest in its existing assets and create much-needed new housing in university markets.”

Unanimously approved by ACC’s board of directors and the independent special committee of ACC’s board, the transaction is expected to close in the third quarter of 2022, subject to approval by ACC’s shareholders and other customary closing conditions.

“This transaction represents the culmination of the passion and dedicated service of the ACC team to our student residents and university partners, while creating significant value for our shareholders,” concluded Mr Bayless. “Moving forward together, the combined synergies of our organisations will enable us to better serve our current and future residents and university partners.”

News: Blackstone to buy American Campus Communities for nearly $13 billion

KKR agrees Barracuda deal

BY Richard Summerfield

KKR & Co has agreed to acquire cyber security firm Barracuda Networks from its private equity owner Thoma Bravo. While no financial terms were disclosed, the transaction is believed to be worth around $4bn, including debt.

The deal, which is expected to close by the end of the year, subject to customary conditions, is the latest in the increasingly active cyber security space. Dealmaking in the market has intensified over the last two years as remote working became the norm following the outbreak of the coronavirus (COVID-19) pandemic. Russia’s invasion of Ukraine has also caused companies to redouble their efforts on the cyber security front amid a rise in cyber attacks.

Founded in 2003, Barracuda is a developer of cyber security solutions, including email protection, app and cloud defences, data management and network security. The company caters to approximately 200,000 customers worldwide across a variety of industries, including education, government, financial services, health care, retail, consumer goods and manufacturing. Barracuda tends to focus on small to medium-sized businesses.

Thoma Bravo acquired Barracuda in 2017 for $1.6bn. Since that time, the company has enjoyed growth of over $500m in revenue.

“We believe that with the support of KKR, we will continue to invest in growth and foster a culture that gives our team the resources and inspiration to continue to create and deliver the next generation of leading cybersecurity solutions for our customers and partners,” said Hatem Naguib, chief executive of Barracuda. “We are very appreciative of Thoma Bravo’s support and very excited to be working with KKR on this next phase of Barracuda’s journey.”

“We continue to see cybersecurity as a highly attractive sector and are excited to back a clear leader in the space,” said John Park, head of Americas technology private equity at KKR. “Given its proven track record of growth and innovation, we believe that Barracuda has the right team and model to capture business in this growing market.”

“Barracuda has built an impressive portfolio of solutions that are helping SMEs around the world protect their data and address critical security challenges,” said Bradley Brown, managing director at KKR. ”We see a tremendous opportunity for long-term growth as these businesses continue to invest more in cybersecurity and we look forward to helping Barracuda scale and deliver next generation products that meet this growing need.”

The investment in Barracuda builds upon KKR’s experience investing in the cyber security sector globally, with investments including Ping, Cylance, DarkTrace, ForgeRock, NetSPI and Optiv, among others.

News: KKR to buy cybersecurity firm Barracuda from Thoma Bravo in deal worth about $4 bln

Berkshire Hathaway agrees $11.6bn Alleghany acquisition

BY Richard Summerfield

Berkshire Hathaway has agreed to acquire insurance firm Alleghany Inc in a deal worth $11.6bn. The acquisition, upon completion, would be one of the five largest deals in Berkshire’s history and will put some of the firm’s $146.7bn of cash and equivalents to work after a nearly six year wait for a large deal.

The all-cash acquisition of Alleghany will expand Berkshire’s already considerable insurance holdings, including brands like Geico auto insurance. Alleghany’s core businesses are property and casualty reinsurance and insurance.

Under the terms of the deal, Berkshire will pay $848.02 in cash for each outstanding share of Alleghany. The price represents a 25 percent premium over Friday’s closing price, the last day of trading before the deal was announced.

Upon completion, which is expected in the fourth quarter of 2022, pending regulatory and Alleghany shareholder approvals, Alleghany will operate as an independent unit of Berkshire. The company has 25 days to actively solicit and consider alternative acquisition proposals under a ‘go-shop’ provision.

“Berkshire will be the perfect permanent home for Alleghany, a company that I have closely observed for 60 years,” said Warren Buffett, chairman and chief executive of Berkshire Hathaway. “Throughout 85 years the Kirby family has created a business that has many similarities to Berkshire Hathaway. I am particularly delighted that I will once again work together with my long-time friend, Joe Brandon.”

“My family and I have been significant shareholders of Alleghany for over 85 years and are proud that our ownership will culminate through this compelling transaction with Berkshire Hathaway,” said Jefferson W. Kirby, chair of the Alleghany board of directors. “Not only does this deal provide substantial and certain value to stockholders, but it provides a rare opportunity to join forces with a like-minded and highly respected investor and business leader. Berkshire Hathaway’s support, resources, and expertise will provide added benefits and opportunities for Alleghany and its operating businesses for many years to come.”

“This is a terrific transaction for Alleghany’s owners, businesses, customers, and employees,” said Joseph P. Brandon, president and chief executive of Alleghany. “The value of this transaction reflects the quality of our franchises and is the product of the hard work, persistence, and determination of the Alleghany team over decades. As part of Berkshire Hathaway, which epitomizes our long-term management philosophy, each of Alleghany’s businesses will be exceptionally well positioned to serve its clients and achieve its full potential.”

News: Buffett ends drought with $11.6 bln Alleghany purchase

AGL bats away Brookfield bid

BY Richard Summerfield

AGL Energy has rejected an unsolicited, sweetened $4bn takeover offer from tech billionaire Mike Cannon-Brookes of Grok Ventures and Canadian investment management firm Brookfield Asset Management. The offer, according to AGL, undervalued the company.

“The AGL Energy Board considers that the Revised Unsolicited Proposal is still well below both the fair value of the company on a change of control basis and relative to the expected value of the proposed demerger, and therefore is not in the best interests of AGL Energy shareholders,” noted AGL in a statement.

The revised proposal was for A$8.25 a share, a 15 percent premium to AGL’s share price on 18 February. The first proposal from the Brookfield-led consortium would have seen AGL shareholders receive A$7.50 per share.

“The revised unsolicited proposal continues to ignore the opportunity that AGL Energy shareholders have through our proposed demerger to realise potential future value,” said Peter Botten, chairman of AGL Energy. “It also ignores the momentum we have recently seen in the business through our solid half-year result, strong progress on the demerger, strong interest in our Energy Transition Investment Partnership and the improvements we are seeing in forward wholesale prices.”

The consortium’s proposal to spend between A$10bn and A$20bn in large-scale renewable energy and batteries to enable the early closures of AGL’s power stations that account for 8 percent of Australia’s overall greenhouse gas emissions “would have been the world’s biggest decarbonisation project”, according to Mr Cannon-Brookes. In response to AGL’s rejection of the offer, Mr Cannon-Brookes tweeted that the “Brookfield-Grok consortium looking to take private & transform AGL is putting our pens down, with great sadness”.

AGL owns three large coal plants, some gas and renewable assets, and one of Australia’s biggest energy retail business, with more than 4 million customers, according to its 2021 annual report.

Last year, AGL proposed splitting the company into separate publicly traded companies — AGL Australia and Accel Energy — aiming to cut greenhouse gas emissions by as much as 60 percent by 2034. The move would split the company’s retail and coal generation businesses to operate them as two separate divisions. The demerger is progressing well and on track for completion by June this year, the company said last month.

News: Australia's AGL Energy rebuffs sweetened $4 bln bid from Brookfield-led team