Fairness opinions › Home-Based Services › 2023

Amedisys acquired by UnitedHealth Group: fairness opinion by Guggenheim Securities

Announced June 26, 2023 · One-step merger · All cash · DEFM14A filed August 10, 2023

Home-Based Services Home Health / Hospice

Enterprise value

$3.6B

EV / LTM EBITDA

15.2x

EBITDA $239M · 10% margin

EV / LTM revenue

1.59x

revenue $2.3B

DCF discount rate

8.3%–10.5%

Perpetuity growth

Deal terms

ConsiderationAll cash

Price per share$101.00

Premium—

Premium basis—

StructureOne-step merger

Termination fee$125M

Reverse termination fee$144M

Go-shopNone

Outside dateJune 26, 2024

FilingDEFM14A · EDGAR index

Implied value per share by method vs. $101.00 offer

Selected companies — EV / CY2023E Adj. EBITDA $77.00 – $99.00

Selected companies — EV / CY2024E Adj. EBITDA $75.50 – $90.25

Precedent transactions — Transaction Equity Value / LTM PF Adj. EBITDA (net of minority interests) $71.00 – $108.25

Discounted cash flow $63.75 – $103.25

Analyst Stock Price Targets (as of May 2, 2023) $72.00 – $130.00

Analyst Stock Price Targets (published after May 2, 2023 and prior to June 23, 2023) $73.00 – $115.00

52-Week High/Low Stock Prices $69.37 – $131.32

Ranges as disclosed in the banker’s summary of analyses; the red line marks the per-share consideration.

Opinion of Guggenheim Securities to the target board

Delivered June 25, 2023 · Fee $37.0M, $8.0M on delivery of the opinion

Discounted cash flow assumptions

Discount rate8.3%–10.5%

BasisGuggenheim Securities' estimate of Amedisys' weighted average cost of capital

Terminal valuePerpetuity growth

Perpetuity growth2.0%–3.0%

Exit multiple—

Projection periodQ2-Q4 2023E-2027E (with interim growth period 2028-2032)

Projections usedAmedisys long-range plan (Amedisys-Provided Financial Projections)

Implied value per share$63.75–$103.25

Two-stage terminal value: 5.5% interim growth rate for 2028-2032, then perpetual growth of 2.00%-3.00% on normalized after-tax unlevered free cash flow; terminal values cross-checked against implied terminal year (2027) EV/EBITDA multiples. Share prices rounded to nearest $0.25.

Selected public companies (5)

Addus Homecare Corporation · Aveanna Healthcare Holdings Inc. · Chemed Corporation · Enhabit, Inc. · ModivCare, Inc.

Multiple	Peer low	Peer median	Peer high	Range applied	Implied per share
EV / CY2023E Adj. EBITDA	7.4x	15.2x	18.5x	12.0x–15.0x	$77.00–$99.00
EV / CY2024E Adj. EBITDA	6.6x	13.9x	17.1x	11.5x–13.5x	$75.50–$90.25

Selected precedent transactions (15)

Date	Target	Acquirer	Multiple
2022-04	Kindred at Home	Clayton, Dubilier & Rice LLC	10.6x Transaction Equity Value / LTM EBITDA (excluding non-controlling interest)
2022-03	LHC Group, Inc.	UnitedHealth Group Incorporated	22.7x Transaction Equity Value / LTM EBITDA (excluding non-controlling interest)
2021-12	Comfort Care Home Health	Aveanna Healthcare	13.8x Transaction Equity Value / LTM EBITDA (excluding non-controlling interest)
2021-04	Kindred Healthcare, Inc.	Humana Inc.	12.5x Transaction Equity Value / LTM EBITDA (excluding non-controlling interest)
2021-02	Abode Healthcare	BrightSpring Health Services	15.5x Transaction Equity Value / LTM EBITDA (excluding non-controlling interest)
2020-10	St. Croix Hospice	H.I.G. Capital	15.5x Transaction Equity Value / LTM EBITDA (excluding non-controlling interest)
2020-10	Care Hospice	Thomas H. Lee	15.0x Transaction Equity Value / LTM EBITDA (excluding non-controlling interest)
2020-04	AseraCare Hospice	Amedisys, Inc.	12.4x Transaction Equity Value / LTM EBITDA (excluding non-controlling interest)
2019-10	Compassus	TowerBrook Capital Partners L.P. / Ascension Health	11.8x Transaction Equity Value / LTM EBITDA (excluding non-controlling interest)
2018-10	Compassionate Care Hospice Group, Inc.	Amedisys, Inc.	10.7x Transaction Equity Value / LTM EBITDA (excluding non-controlling interest)
2018-04	Curo Health Services	Humana Inc. / TPG Capital / Welsh, Carson, Anderson & Stowe	14.0x Transaction Equity Value / LTM EBITDA (excluding non-controlling interest)
2017-11	Almost Family, Inc.	LHC Group, Inc.	15.7x Transaction Equity Value / LTM EBITDA (excluding non-controlling interest)
2014-11	EHHI Holdings, Inc.	HealthSouth Corporation	10.6x Transaction Equity Value / LTM EBITDA (excluding non-controlling interest)
2014-10	Gentiva Health Services, Inc.	Kindred Healthcare, Inc.	11.1x Transaction Equity Value / LTM EBITDA (excluding non-controlling interest)
2013-09	Harden Healthcare Holdings, Inc.	Gentiva Health Services, Inc.	11.1x Transaction Equity Value / LTM EBITDA (excluding non-controlling interest)

Multiple	Low	Median	High	Range applied	Implied per share
Transaction Equity Value / LTM PF Adj. EBITDA (net of minority interests)	10.6x	12.5x	22.7x	11.0x–16.0x	$71.00–$108.25

Other analyses

Analysis	Summary	Implied per share
Analyst Stock Price Targets (as of May 2, 2023)	Reviewed fifteen Wall Street equity research analyst price targets published in February, March and April 2023; range $72.00-$130.00 with median $107.00. For informational reference purposes only.	$72.00–$130.00
Analyst Stock Price Targets (published after May 2, 2023 and prior to June 23, 2023)	Twelve of the same analysts published targets ranging $73.00-$115.00 with median $97.00 (three did not publish). For informational reference purposes only.	$73.00–$115.00
52-Week High/Low Stock Prices	Over the twelve months preceding June 23, 2023, the lowest trading price was $69.37 (March 23, 2023) and the highest was $131.32 (July 22, 2022). For informational reference purposes only.	$69.37–$131.32

Estimated cash transaction fee of approximately $37 million; Amedisys previously paid cash opinion fees of $8 million in the aggregate, which will be credited against the transaction fee. Expenses reimbursed and indemnity provided.

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Management projections

Projection year	Year 1	Year 2	Year 3	Year 4	CAGR
Revenue	$2.5B	$2.8B	$3.2B	$3.6B	13.0%
Revenue growth	8.3%	11.2%	14.4%	13.3%
EBITDA	$249M	$272M	$295M	$318M	8.5%
EBITDA growth	4.2%	9.2%	8.5%	7.8%
EBITDA margin	10%	10%	9%	9%
Implied EV / EBITDA	14.6x	13.4x	12.3x	11.4x

Year-1 growth is against LTM at announcement ($2.3B revenue, $239M EBITDA); later years are year over year.

Amedisys management prepared a five-year standalone long-range plan for fiscal years 2023-2027 (the "Amedisys March long-range plan"), later revised in April 2023 for accounting treatment of the Contessa risk-based palliative contract and YTD results (the "Amedisys long-range plan"), which Guggenheim was directed to use. The March plan showed revenue of $2,291M in 2023E rising to $3,576M in 2027E with Adjusted EBITDA of $239M rising to $318M. The revised Amedisys long-range plan showed Q2-Q4 2023E revenue of $1,729M and Adjusted EBITDA of $187M, growing to 2027E revenue of $3,086M and Adjusted EBITDA of $318M, with free cash flow of $147M (Q2-Q4 2023E) to $198M (2027E). High case and low case sensitivities to the March plan were also provided to the Board but not to Parent.

Process notes

Amedisys had previously signed a merger agreement with Option Care Health (announced May 3, 2023), which was terminated on June 26, 2023 upon payment by UnitedHealth, on Amedisys' behalf, of a $106 million termination fee to Option Care Health; Amedisys must reimburse that amount in specified termination scenarios. Single fairness opinion from Guggenheim Securities to the Amedisys Board; no special committee. Parent's regulatory break fee is $250 million gross, less the $106 million OPCH fee, equaling a net $144 million. Outside date of June 26, 2024 automatically extends to December 27, 2024 in specified circumstances. Unaffected date used by Guggenheim was May 2, 2023 (closing price $77.26); June 23, 2023 closing price was $91.21.

Other Home-Based Services fairness opinions

LHC Group / UnitedHealth Group 2022 · 20.8x EV/EBITDA
Enhabit / Kinderhook Industries 2026 · 10.0x EV/EBITDA
Almost Family / LHC Group 2017 · 14.3x EV/EBITDA
LHC Group / Almost Family 2017 · 15.5x EV/EBITDA
Gentiva Health Services / Kindred Healthcare Services 2014 · 9.7x EV/EBITDA
Lincare / Linde AG 2012 · 9.1x EV/EBITDA

All Home-Based Services opinions → · Guggenheim Securities opinions