LHC Group Shareholders Vote in Favor of UnitedHealth Group Deal

LHC Group (NASDAQ: LHCG) shareholders overwhelmingly approved the acquisition of the company by UnitedHealth Group (NYSE: UHG) subsidiary Optum for $5.5 billion.

Optum announced the forthcoming deal in April. The purchase agreement stipulates that UnitedHealth Group will acquire LHC Group’s common stock for $170 per share. The companies expect the transaction to close during the second half of the year.

The vote was a customary and necessary step in the acquisition process for a publicly traded company.

“As part of the Optum team and its value-based capabilities, we will be able to expand our patient-centered mission and help drive best care practices across the country,” said Keith G. Myers, LHC Group’s chairman and CEO when the deal was announced. “Working together as organizations committed to caring for the most vulnerable in society will help us more effectively and efficiently deliver high quality and increasingly value-based care in the home.”

More than 27 million of LHC Group’ 31 million shareholders participated in the vote, which met the threshold for a quorum, according to an SEC filing by the Lafayette, Louisiana-based home health and hospice provider. In a separate filing in May, the company’s board urged shareholders to vote in favor of the transaction.

LHC Group’s board and executive leaders began discussions of a possible sale beginning in November 2021. The conversations included several potential buyers, including UnitedHealth Group. Soon after, the company engaged investment banks SVB Securities and Jeffries to lay the groundwork for a deal, according to the May SEC filing.

“LHC requested that SVB Securities and Jefferies, in an informal capacity, begin contacting potential strategic partners about the possibility of a potential transaction with LHC, and subsequently formally engaged Jefferies and SVB Securities as LHC’s financial advisors in connection with a potential transaction,” the SEC filing indicated. “In late November 2021, representatives of Jefferies contacted a representative of UnitedHealth Group to discuss UnitedHealth Group’s potential interest in the home health and hospice sector and a transaction or other strategic partnership with LHC.”

The acquisition agreement includes new employment contracts with Myers and LHC Group President Joshua Proffitt, which became effective at closing. Proffitt will ascend to the CEO role with Myers remaining as chairman. Myers will also retain the honorary title of CEO Emeritus.

Myers per the agreement will receive a sign-on payment of $5.5 million and a base salary of $550,000 annually. Proffitt’s contract has similar provisions, including a $690,000 salary and a sign-on grant of stock options and unites totalling $3 million, subject to a four-year vesting period.

Both will also be eligible for incentive compensation including target bonuses of as much as 100% of salary and annual equity awards, in addition to participation in employee benefits like welfare and retirement plans.

The future of other executives in the LHC Group C-suite remains uncertain. None currently have new employment agreements with Optum, according to the May filing.

As the details continue to shake out, some of those leaders may leave and some may stay.

LHC Group’s 30,000 employees deliver hospice, home health, home- and community-based services, and facility-based care to seniors in 37 states and the District of Columbia.

The company earned nearly $571.5 million in net service revenue during the first quarter, up from $524.8 million during Q1 last year. Of that amount, the hospice segment generated a little more than $101.9 million. This represents a $39.4 million gain for the hospice segment from Q1 2021.

The transaction is indicative of the rising profile of home-based care and value-based reimbursement models.

“We’re really moving at speed to bring together our home and community capabilities,” UnitedHealth Group CEO Andrew Witty said in a Q1 earnings call. “And if you look at what’s really driving alongside our value-based strategy for the clinics, … it’s an extraordinary set of capabilities.”