CVS health Corp.
Canoe Health Inc.,
according to people familiar with the situation, as healthcare heavyweights rush to get their hands on primary care providers.
Talks are serious and a deal to buy Cano could be struck in the coming weeks, assuming the negotiations don’t fall apart, some people said. Cano shares, which had fallen nearly 7%, turned positive and closed 32% after The Wall Street Journal reported on talks with Humana and other unnamed parties, giving the company a market cap of about $4 billion.
Bloomberg then reported the importance of CVS.
It couldn’t be ascertained which other potential buyers would be in the mix, but Cano could be Humana’s to lose, as the health insurer has the right of first refusal on any sale, part of an agreement originally signed in 2019.
Miami-based Cano operates primary care centers in California, Florida, Nevada, New Mexico, Texas, Illinois, New York, New Jersey and Puerto Rico, according to company documentation. It primarily serves Medicare Advantage members, a private sector alternative to Medicare for seniors.
The ties between the companies are deep: Cano was Humana’s largest independent primary care provider in Florida, serving more than 68,000 of its Medicare Advantage members late last year, according to a securities filing. Cano also operated 11 medical centers in Texas and Nevada for which Humana is the exclusive health plan for Medicare Advantage, the filing added.
Humana already has a frontline footprint, which it continues to expand. Earlier this year, the CenterWell Senior Primary Care firm joined private equity firm Welsh, Carson, Anderson & Stowe to open approximately 100 new senior-focused primary care clinics between 2023 and 2025, building on a previous, similar partnership.
On investor day last week, Humana’s chief executive, Bruce Broussard, said the company sees a total addressable market of more than $700 billion in “value-based” primary care for seniors. He noted that over the past five years, Humana has accelerated its investments in the sector and has become the largest senior-focused primary care provider in the country.
There has been a frenzy of deal-making with large companies picking up front-line assets to get closer to patients and provide them with more personalized service.
Meaning health Inc.
for $8 billion earlier this month.
canoe went public in 2020 through a special acquisition vehicle supported by real estate investor Barry Sternlicht, who is on the board. The deal values the company at $4.4 billion.
Cano has been the target of two shareholder activists this year, both of whom independently pushed for the sale. Dan Loeb’s Third Point LLC currently owns approximately 5% of the healthcare company. In March, he pointed to the market’s unfavorable view of companies going public through SPACs as a reason to explore strategic alternatives.
In late August, Owl Creek Asset Management LP sent a letter to Cano’s board saying it had amassed a roughly 4% stake and urging the company to hire investment bankers to investigate a sale to a strategic buyer. .
Cano has been backed by healthcare-focused private equity firm InTandem Capital Partners since 2016. The company mainly invests in small to medium-sized companies.
—Cara Lombardo contributed to this article.
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Appeared in the September 23, 2022 print edition as “Humana, CVS Target Cano Health.”