Enhabit Inc. (NYSE: EHAB) has completed its strategic review, first announced in August of last year. Ultimately, the Company’s Board of Directors decided not to pursue a sale or merger at this time and instead to continue operating as an independent public company.
The home health and hospice giant was spun off from Encompass Health (NYSE: EHC) in July 2022. Due to workforce pressures and Medicare Advantage (MA) penetration, its performance stalled in its first year on the public market, ultimately leading to a strategic review. Enhabit’s stock price was $25 per share when it went public and has since fallen to under $10 per share as of Wednesday afternoon.
Enhabit’s board considered a sale, merger or other transaction, but unanimously decided that the company should continue on its current path on its own.
“We believe that macroeconomic headwinds, including, among other things, uncertain regulatory developments, including Medicare reimbursement policies across the healthcare industry and an evolving antitrust landscape, a difficult healthcare operating environment and persistently high interest rates, ultimately create opportunities for a transaction that will result in improvements “Stifling shareholder value,” Leo Higdon, Enhabit’s chief executive, said in a statement. “Considering this and other strategic alternatives discussed with advisors during the review process, the Board concluded that the best way to increase shareholder value at this time is to continue operating as a standalone company.”
Based in Dallas, Enhabit has 255 home health locations and 112 hospice locations in 34 states.
The company entered into non-disclosure agreements with a “large number of counterparties” and received interest from a “variety” of potential investors. However, according to the press release, no formal proposals have been made.
“With the process of reviewing strategic alternatives complete, the management team is focused on operating Enhabit’s core businesses,” Barb Jacobsmeyer, Enhabit president and CEO, said in a statement. “Our momentum toward the end of 2023 and through the first quarter of 2024, as we have added additional frontline physicians, negotiated more and better home health care contracts, and controlled general and administrative costs, is generating excitement in our strategy and our team, and We are confident that we are implementing the right steps to drive future growth and increase shareholder value.”
The strategic review process was initially promoted by an activist investor, New York-based hedge fund AREX Capital Management.
In October, an open letter said a sale was the “only acceptable outcome” of the strategic review process.
“We strongly emphasize to the Board that there should be absolutely no doubt that the highest bid received in a full and fair auction is the fair value of Enhabit,” AREX Capital wrote at the time. “A sale of the company is the only acceptable outcome of this process.”