An activist investor is reportedly urging Encompass Health Corporation (NYSE: NYSE) to reconsider plans for its large home health and hospice segment.
A little over a year ago, the Birmingham, Alabama-based Encompass Health announced it was “exploring strategic alternatives” for its home health and hospice segment, which posted net operating revenues of about $273.9 million during the third quarter of 2021. Alternatives listed by the company’s leadership team included a potential sale, spinoff, merger or other transaction.
As 2021 moved along, it looked increasingly likely that Encompass Health would spin off the business segment into a new public entity. CFO Doug Coltharp confirmed such plans in October.
“We’re taking a step further today in saying that we now believe that separating [the home health and hospice segment] into a separate independent public company makes the most sense,” Coltharp said on a Q3 earnings call.
Not all investors appear to be pleased with that strategy, however.
Citing sources familiar with the matter, Reuters reported on Tuesday that activist investment firm Jana Partners wants Encompass Health “to re-engage with interested third parties on a potential merger for its home health and hospice business” before executing the anticipated spinoff.
Jana Partners owns more than 2% of Encompass Health and is working with health care veteran Edwin “Mac” Crawford – a former chief executive of Caremark – to push for the new direction.
“Jana Partners and other shareholders believe combining the home health and hospice business with another industry player would better position the company to manage more challenging conditions in the health care industry, including a shortage of nurses,” the Reuters report notes.
Founded in 2001 by Barry Rosenstein, Jana’s website describes it as a firm that “applies a fundamental value discipline to identify undervalued public companies.” In addition to its activist-investment approach, it engages in the sponsorship of special purpose acquisition companies (SPACs).
As of Dec. 16, Encompass Health’s home health and hospice segment included 249 home health locations and 95 hospice locations. The company did not respond to a request for comment from Home Health Care News prior to the publication of this story.
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