Cano Health Shares Soar on Humana and CVS Buyout Rumors

Primary care provider Cano Health’s stock rose sharply late Thursday, $CANO soared over 50% after WSJ reported Humana (HUM) and CVS Health (CVS) and other possible suitors are hovering with a possible deal in the next several weeks citing sources familiar with the negotiations. Bloomberg reported separately that Cano is working with financial advisers and CVS is weighing a potential bid.

CANO Jumped on takeover rumors

Last month Owl Creek Asset Management, which owns a 3.75% stake of 8.69 million shares urged the company to pursue strategic alternatives, including a possible sale. Owl Creek urged Cano to engage with investment bankers to pursue a sale to a strategic buyer.

Back in March activist investor Dan Loeb’s Third Point hedge fund pushed CANO to explore strategic alternatives, including a potential sale. The shares jumped 43% on March 9 with that news.

Cano is based in Miami and operates primary-care centers in California, Florida, Nevada, New Mexico, Texas, Illinois, New York, New Jersey and Puerto Rico. The company mainly serves Medicare Advantage members, a private-sector alternative to Medicare for seniors.

Cano has been backed by health-care-focused private-equity firm InTandem Capital Partners since 2016. The company went public in 2020 through a special-purpose acquisition vehicle (SPAC) backed by real-estate investor Barry Sternlicht, who sits on its board. The deal valued the company at $4.4 billion.

Humana Link

A potential acquisition is fueled by Humana having a right of first refusal on any Cano sale, part of an agreement that was originally struck in 2019. Cano being Humana’s biggest independent primary-care provider in Florida, serving over 68,000 of its Medicare Advantage members at the end of last year, according to a securities filing. Cano also operated 11 medical centers in Texas and Nevada for which Humana is the exclusive health plan for Medicare Advantage, the filing added.

Bloomberg said Humana has already established a footprint in primary care, which it continues to expand. Earlier this year, its CenterWell Senior Primary Care business joined with private-equity firm Welsh, Carson, Anderson & Stowe to open about 100 new senior-focused primary-care clinics between 2023 and 2025, building on an earlier, similar partnership.

At its investor day last week, Humana’s chief executive, Bruce Broussard, said that the company sees a total addressable market of over $700 billion in “value-based” primary care for seniors. He noted that Humana has accelerated its investment in the sector over the past five years, becoming the nation’s largest senior-focused primary-care provider.

Bloomberg

In this space other recent deals include Amazon’s (AMZN) purchase of One Medical (ONEM) for $3.9 billion in July and CVS’s (CVS) recent deal to acquire Signify Health (SGFY) for $8 billion, $30.50/share, this was a 54% premium from just before the deal. Since those deals interest rates have soared and the stock market has sold off making access to capital much more difficult is an important consideration.

Source: WSJ

From the TradingCommunity Research Desk