Leerink Partners adjusted its price target on Enhabit Home Health & Hospice to $13.80 from $9.50 and left its recommendation at Market Perform following the announcement of a definitive acquisition agreement. Kinderhook Industries agreed to acquire Enhabit at $13.80 per share.
The acquisition price equates to an implied valuation roughly equal to 10.6 times Leerink's 2026 EBITDA estimate when excluding any potential value attributable to VitalCaring. By comparison, Enhabit's current enterprise value-to-EBITDA multiple is approximately 12 times based on trailing twelve-month EBITDA of $87.4 million.
Leerink explained its updated target by applying a 10 times multiple to its 2027 EBITDA forecast, mirroring the valuation implied by Kinderhook's offer. That mark sits below some recent transactions in the sector, including one where the multiple exceeded 20 times and another near 12 times, according to the reporting.
The structure of certain contingent interests is relevant to the deal calculus. Both Enhabit and another unnamed party hold rights to 43% of the profits arising from a future sale of VitalCaring. The company itself has wrestled with flat to declining earnings for nearly five years, a trend the report ties to reimbursement headwinds and payer pressures.
Those sectorwide strains date back to implementation of the Patient-Driven Grouping Model in 2020. Following PDGM, the home health industry experienced billions in rate reductions due to recoupment of temporary and behavioral adjustments. There is an expectation within the industry that the Centers for Medicare and Medicaid Services may not enact further behavioral adjustment rate cuts in upcoming rulemaking, though the industry has navigated an extended period of financial stress.
Market reaction to the takeover proposal has been varied among sell-side firms. The agreement values Enhabit at about $1.1 billion in an all-cash transaction. Under the terms, shareholders will receive $13.80 per share, which represents a 24% premium to the company's prior closing price and a 33.8% premium to its 60-day volume-weighted average share price.
Following the acquisition announcement, Truist Securities raised its price target for Enhabit to $13.80 while maintaining a Hold rating. Separately, TD Cowen upgraded Enhabit's stock from Hold to Buy, citing an improving regulatory environment as a material factor in its view.
Analysts' consensus expectations cited in the reporting indicate the company is forecast to return to profitability this year after recent losses. The revised price target from Leerink and the acquisition terms together frame Enhabit's near-term transition toward private ownership under Kinderhook Industries.
Context and next steps
The transaction and Leerink's valuation recalibration highlight a negotiation between historical operating challenges in home health and an acquirer's willingness to pay a premium to take the company private. Stakeholders will be watching any future disclosures related to VitalCaring and the mechanics for distributing profits tied to its potential sale.