Ensign Group Spins Off Hospice and Home Health Segment

The Ensign Group, Inc. (Nasdaq: ENSG), will separate its hospice and home health segments into a publicly traded entity called The Pennant Group, Inc., with the split expected to complete in the 4th quarter of the year, pending regulatory, legal and board approval.

Pennant will include 60 home health and hospice agencies, 51 senior living operations, and mobile diagnostics and lab operations located across 13 states, with 23 of the senior living assets subject to leases with third-party landlords, as well as mobile diagnostic services and clinical laboratory operations.

Pennant will also operate 28 senior living communities pursuant to a new, long-term triple-net leases with Ensign subsidiaries.

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“These two companies have run side by side and shared best practices along with the lab and x-ray company,” Ensign CEO Christopher Christensen said. “They have been interacting with each other on a daily, weekly, monthly basis. When they got to the point where they were healthy enough, with their own service center, their own resources, their own balance sheet, it just felt like the right time for them to spin off and become their own entities.”

Ensign’s transitional and skilled services portfolio, as well as its rehabilitative care services, health care campuses, post-acute new business ventures and the company’s 77 existing owned real estate holdings will continue to operate as The Ensign Group.

To maintain the relationship between the two companies and Ensign’s other subsidiaries, they have formed a preferred-provider network, allowing operations under each corporate umbrella to share information and facilitate transitions among care settings.

Ensign’s senior leadership team will remain in place, though after the spin-off is complete, Christensen will also serve as a director for both companies. Daniel Walker, president of Cornerstone Healthcare, an Ensign subsidiary that provides hospice and home health care, will become CEO of Pennant.

“Ensign and Pennant have created a preferred provider network called the Ensign Pennant Care Continuum, which will memorialize the operational partnership we have always enjoyed under Ensign’s ownership,” said Walker. “As preferred providers within the care continuum, each Ensign and Pennant operation that elects to opt into the network will work together to appropriately share data and create care pathways designed by our clinicians to achieve the highest possible outcomes in transitions between care settings.”

Pennant has submitted an application for listing on the NASDAQ stock market under the symbol “PNTG.” and will distribute shares of Pennant’s common stock to shareholders on a pro rata basis, expected to be tax free excluding cash paid in lieu of fractional shares.

Each stockholder is expected to receive one share of Pennant common stock for every two shares of Ensign common stock they hold, pending acceptance by NASDAQ, approval by the company’s board as well as the Securities and Exchange Commission (SEC), the company indicated in a letter to stockholders filed with the SEC.

Pennant intends to continue Ensign’s policy of seeking hospice and home health acquisitions, in addition to mobile x-ray and laboratory businesses. Hospice and Home health subsidiary Cornerstone acquired Resolutions Hospice last week and Texas-based All County Home Care & Hospice in March.

“As we have emphasized repeatedly over the last several quarters, our home health, hospice and senior living leaders have created significant value as they have embraced and applied Ensign’s innovative operating model.  As a result of consistently achieving outstanding clinical results, Pennant has become the partner of choice in the markets they serve, and it shows in their financial and clinical results,” Christensen said. “We believe that this spin-off, much like the very successful spin-off of CareTrust in 2014, will shine light on value that has yet to be fully realized under Ensign and will present two very attractive investments that provide our partners and shareholders the opportunity to share in that value, now and over time.”

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