Kindred Overcomes Shareholder Suit, Merger Vote Moves Forward

A scheduled shareholder vote to sell Kindred Healthcare (NYSE: KND) will move forward after a judge dismissed a lawsuit by a major shareholder.

Brigade Capital Management, a New York-based private equity firm with a 5.8% stake in Louisville-based Kindred, sued the health care provider in an attempt to delay or block the vote to sell the company for approximately $9 per share.

Kindred has been working through that acquisition deal, worth approximately $4.1 billion in total, since announcing it in late December. Insurance giant Humana (NYSE: HUM) and private equity groups TPG Capital and Welsh, Carson, Anderson & Stowe (WCAS) would acquire Kindred at Home.

The deal would split up Kindred’s home health care business from its hospital and rehabilitation business, with Humana owning 40% of the home health operations and the private equity groups owning the remaining 60%.

Brigade was quick to protest the deal, sending public letters urging shareholders to vote against the transaction and ultimately filing its suit.

In its motion, Brigade Capital argued the acquisition price of $9 per share was inadequate and that Kindred management was acting out of self-interest. Kindred has released more proxy materials since its initial announcement of the deal with Humana and private equity groups, which further explain its assumptions about the company and its prospects as an independent entity, but these did not satisfy Brigade.

The Court of Chancery of the State of Delaware rule in favor of Kindred by denying the motion for preliminary injunction filed by Brigade Capital, Kindred announced Wednesday. Its scheduled shareholder vote is for Friday, March 29.

“We are pleased that the court has denied all of the relief Brigade sought,” a statement from Kindred reads. “As we have maintained, the Kindred Board of Directors acted in accordance with its fiduciary duties and in the best interests of all stockholders throughout the entirety of its 18-month long process to maximize stockholder value.”

The court did rule that the voting period will be open for five business days to provide stockholders additional time to seek appraisal of their stock, if they desire. The meeting will reconvene on April 5 to close the polls and conclude the meeting.

Written by Amy Baxter