EXCLUSIVE Encompass Health's home health unit attracts acquisition interest-sources

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March 4 (Reuters) - Private equity firms including Advent International and companies including Aveanna Healthcare Holdings Inc (AVAH.O) have expressed interest in acquiring the home health and hospice business of Encompass Health Corp (EHC.N), people familiar with the matter said.

Encompass, which provides post-acute healthcare services, said in October that it planned to spin off the business, called Enhabit, in the first half of 2022. Last month the Birmingham, Alabama-based company said it was open to the separation happening through a sale or a merger.

The sources said Enhabit could be worth as much as $3 billion in a sale. Aveanna provides pediatric and adult healthcare services including rehabilitation and hospice services and has a market capitalization of $745 million. Were it to press on with a bid, it would likely need financial backing of top shareholders, including private equity firm Bain Capital.

Representatives for Encompass, Advent and Aveanna did not return calls and emails seeking comment. A representative for Bain declined to comment.

A shortage of nurses has prompted many players in the U.S. home care sector to try to bulk up or exit. The regulatory environment for mergers in this space has been tough, however. Aveanna abandoned its $1.2 billion acquisition of Maxim Healthcare in 2020 after the Federal Trade Commission objected to the deal.

Encompass would not need antitrust clearance if it spun off Enhabit to its shareholders or sold it to a private equity firm that does not own a competing business.

Last year hedge fund Jana Partners pushed Encompass, which has a market value of $6.7 billion, to engage with third parties on a potential merger for Enhabit, which offers skilled nursing, aide and homemaker services and occupational therapy.

The hedge fund and other shareholders said combining Enhabit with another industry player would better position the company to manage more challenging conditions in the healthcare industry. Encompass said last month that it would slim down its board to no more than 12 directors after discussions with stockholders, including Jana Partners.

Reporting by Svea Herbst-Bayliss; Editing by Cynthia Osterman

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