Amedisys, Inc. AMED recently purchased back half of KKR & Co. L.P.’s holdings of its common shares. More specifically, the company bought back more than 2.4 million of its common stock from the global investment firm for a total transaction value of $178 million. The deal also included 7.1% of the aggregate outstanding shares of the company’s common stock.
The repurchase deal reflected a price of $73.6, which is 96% of yesterday’s closing value of to $77.04. The transaction will be immediately accretive to the company’s bottom line by 6-7%. Following this news, shares of Amedisys inched up 0.54% at the close of trading on Monday Jun 4, 2018.
Amedisys is expected to finance the deal using its $140 million of available cash and the existing revolving credit facility. With this, the company will be left with $20 million of cash in hand and its outstanding borrowings under the credit facility of $128 million. This in turn will result in a net leverage ratio of approximately 0.7x.
As a home health and hospice care provider, Amedisys is upbeat about this recent development, which remains in line with its strategy to deploy capital in an accretive manner, maintaining low leverage and a substantial borrowing capacity for future investment.
In this regard, Amedisys’ accretive acquisitions will continue to be its first priority for capital deployment and accordingly, the company considers this transaction the best utility of capital given the current buyout multiples and the company’s business prospects.
The company also noted that KKR will continue to remain a significant shareholder of Amedisys. Accordingly, Nathaniel M. Zilkha, a member of the general partner of KKR & Co. L.P., will still remain a director on Amedisys’ board.
Other Recent Acquisitions by Amedisys
Over the past year, the company made a number of strategic acquisitions, the recent one being East Tennessee Personal Care Service (ETPCS), a personal care provider headquartered in Knoxville, TN. Per Amedisys, this buyout will enlarge the company’s personal care footprint outside Massachusetts and Florida. This apart, the company bought Intercity Home Care, a personal care provider based in Malden, MA. Notably, Intercity Home Care’s entire asset base has been taken over by Associated Home Care. With this, Amedisys believes to have a wider presence in Massachusetts.
Other important acquisitions of late include three home health centers (one each in Illinois, Massachusetts and Texas) and two hospice care centers (one in Arizona and another in Massachusetts) from Tenet Healthcare in May 2017 along with the assets of Home Staff, L.L.C., earlier in February, last year.
Share Price Performance
Over the past three months, shares of Amedisys have outperformed the industry it belongs to. The stock has rallied 31.2% compared with the industry’s 4% rise.
Zacks Rank & Other Key Picks
Amedisys currently carries a Zacks Rank #2 (Buy). A few other top-ranked stocks in the broader medical sector are Intuitive Surgical ISRG, Illumina, Inc ILMN and Varian Medical Systems, Inc. VAR. While Intuitive Surgical and Illumina sport a Zacks Rank #1 (Strong Buy), Varian Medical carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Intuitive Surgical has an expected long-term earnings growth rate of 12.1%.
Illumina expects long-term earnings growth of 20%.
Varian Medical has an expected earnings growth rate of 25% for the current year.
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