Kindred Healthcare Inc. shareholders are asking a federal judge to pause the company’s $4.1 billion sale to Humana Inc. and two private equity firms until it fixes “misleading” disclosures.
A proposed class action, filed Feb. 8 in the U.S. District Court for the District of Delaware, alleges the directors of the Louisville, Ky.-based firm omitted important financial projections from its proxy materials related to the merger.
Kindred stockholders will receive $9 in cash per share from the deal, which splits the company into two parts—a home health and hospice business, and a specialty hospital unit.
Humana, also based in Louisville, is buying a 40 percent stake in the stand-alone home health company, with the option for full ownership over time. Private equity groups TPG Capital and Welsh, Carson, Anderson & Stowe will control the hospital unit and the remaining 60 percent of the home health business.
Claims of Negligence
Kindred directors “were, at the very least, negligent in preparing and reviewing” the proxy statement that’s meant to garner stockholder support for the deal, according to the complaint.
The proxy didn’t include free cash flow projections and portions of financial analyses that shareholders need to make an informed decision, it said.
For future events and uncertain figures, “a company may choose silence or speech,” but it may not choose “half-truths,” the complaint said.
The lawsuit claims the merger’s $9 cash consideration is “inadequate in light of Kindred’s recent financial performance and outlook,” pointing to it 52-week high trading price of $11.90. All-cash mergers usually offer significant premiums, not discounts, to trading prices, it said.
The shareholder responsible for the complaint, Mazy Sehrgosha, is asking the court to stop Kindred’s sale unless and until the alleged missing information is included in a new proxy statement. Sehrgosha is also seeking damages.
Kindred didn’t immediately respond to a request for comment.
The case is Sehrgosha v. Kindred Healthcare Inc., D. Del., No. 1:18-cv-00230-UNA, complaint filed 2/8/18.