Private equity firm TPG Capital LP is considering making an offer for LHC Group Inc (LHCG.O) as the provider of home health and hospice services reviews its strategic alternatives, two people familiar with the matter said.
"Private equity makes more sense at this point," said Kevin Ellich, senior research analyst at Piper Jaffray & Co. "You take the company private and deal with the regulatory and reimbursement headwinds in the next couple of years."
TPG approached LHC after it announced last month that it had appointed J.P. Morgan Securities LLC (JPM.N) to advise it on its options, the people said. This, however, may not necessarily result in an offer, they cautioned.
TPG declined to comment, while a spokesman for LHC did not respond to a request for comment.
LHC, which has a market capitalization of about $360 million, said on February 14 that it had begun a strategic review to enhance stockholder value and that it had not set a definitive timetable for completion of the process.
The home-care industry is benefiting as more people live longer and require chronic care for more time.
But LHC Group as well as peers Almost Family (AFAM.O), Gentiva Health GTIV.O and Amedisys Inc (AMED.O) have suffered from a series of setbacks, including reimbursement cuts, federal investigations into billing practices, and new Medicare regulations.
LHC shares were up 10 percent at $20.19, a six-month high, in afternoon trading following the Reuters report. Other industry stocks also benefited from the news, Gentiva and Amedisys both up 5 percent and Almost Family gaining 2 percent.
Founded in Louisiana in 1994, LHC serves more than 80,000 patients annually in 19 U.S. states. It has said it expects 2012 earnings per share of $1.45 to $1.65, compared with a loss of 73 cents in 2011.
(Reporting by Greg Roumeliotis in New York; Editing by Lisa Von Ahn and Dave Zimmerman)