Almost Family (AFAM) to Acquire Controlling Interest in Community Health (CYH) Home Health and Hospice Unit for $128M

October 17, 2016 7:03 AM EDT

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Almost Family, Inc. (Nasdaq: AFAM) signed a definitive agreement to acquire a controlling interest in the entity holding the home health and hospice assets of Community Health Systems, Inc. (NYSE: CYH) (CHS) (referred to herein as CHS Home Health, pertaining solely to the home health and hospice business of CHS). CHS Home Health, a provider of skilled home health and hospice services, currently operates 74 home health and 15 hospice branch locations in 22 states. With the completion of this transaction, Almost Family will operate 340 branches across 26 states and its annual net revenue run rate is expected to exceed the $800 million mark.

Strategic Rationale for the Transaction

  • Substantial additional scale with approximately $200 million in annual revenues: ~$170 million in home health and ~$30 million in hospice
  • A true post-acute healthcare partnership working together to:
    • Better manage the needs of patients across the CHS hospital network
    • Collaborate on new and better ways to care for patients improving care transitions and care coordination enabling us to deliver higher quality to patients at a lower cost to the Medicare Program
    • Provide future development opportunity for joint venture locations, through acquisition or development of home health agencies where CHS Hospital locations are not currently supported by a common owned certified agency
  • Substantially expands Almost Family’s geographic service territory to a total of 26 states
  • The combined companies care for, on average, 50,000 patients every day
  • Based on the most recently available data from CMS, with this combination Almost Family would become the third-largest Medicare home health provider in the US
  • Almost Family may opportunistically access the equity markets to reduce leverage, subject to market and other conditions

Company Comments on the TransactionWilliam B. Yarmuth, CEO of Almost Family, noted: “Over the past few years, Almost Family has grown dramatically, both in size and in scope. In addition to being one of the nation’s largest home health providers, our HealthCare Innovations investments have brought us new perspectives and enabled us to be much more active in the development of new care delivery models. This partnership with CHS may be the most strategic of all the investments we’ve made yet. We believe it will enable us to see the health care continuum and home care specifically through the eyes of not only one of America’s best hospital companies, but one of America’s best healthcare companies, leading us to an even better understanding of the needs of our patients and how to meet them.”

Wayne Smith, CEO of CHS, stated: “While we are reducing our ownership interest in our home health and hospice division, it is important to us to retain a meaningful interest to help ensure appropriate post-acute care coordination for the benefit of our patients. We believe hospitals need strong strategic post-acute partners to provide the right care for patients and return them safely and securely home following a hospital stay. We selected a partner with proven capabilities and a successful track record."

Steve Guenthner, President of Almost Family, added: “As one of the nation’s largest home health providers, we’re looking forward with great anticipation to working hand-in-hand with one of the nation’s foremost hospital companies. We expect the knowledge and perspective we gain and share with each other through this relationship, to help us develop even better care transition and coordination capabilities for the benefit of our patients and for the Medicare Program. Building on this incredible foundation we will continue our efforts to be a thought-leader in the evolution of healthcare delivery models and elevate our service capabilities for patients and other hospitals over all our service territories.”

Yarmuth concluded, “The market for healthcare services is intensely competitive and we continue to position ourselves for continued growth and development. With this partnership, our breadth and depth now includes, in addition to skilled home health care, personal care services, ACO management, In-Home Assessment capabilities, a phenomenal hospital partnership, and now even a small entrée into hospice. We’re exceptionally proud and pleased to welcome the employees, patients and referral sources of CHS Home Health to our growing family of home care companies.”

Transaction TermsThe total purchase price for 80% of the equity interest in CHS Home Health is $128 million, subject to a working capital adjustment. Financing for the transaction has been fully committed by JPMorgan. Almost Family expects the transaction to be completed during the fourth quarter, subject to regulatory approvals and the satisfaction of customary closing conditions. The acquisition is expected to be accretive to EPS in 2017.

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