Possible Lincare, AHP marriage not surprising

CLEARWATER, Fla. - It's not a done deal, but news that Lincare is in talks to buy American HomePatient makes sense, industry analysts say.

“I'm surprised it hasn't happened already,” said Jonathan Sadock, managing partner/CEO of Paragon Ventures. “AHP has been in so much turmoil and it will be a bargain for whomever gets it.”

Bloomberg reported Oct. 23 that Lincare is in discussions to buy Brentwood, Tenn.-based AHP from Highland Capital Management, an investment firm that acquired the provider and took it private in 2010.

Highland Capital helped AHP avoid bankruptcy, but it may be time for the firm to cut its losses before CMS expands the competitive bidding program to non-bid areas on Jan. 1, say analysts.

“I think the investors really haven't been investing in and growing the business,” said Rick Glass, president of Steven Richards & Associates. “The impending cuts—that's going to have a big impact on them.”

AHP focuses primarily on respiratory services and has more than 1 million patients annually through about 250 locations. Lincare, which was acquired by Linde for $3.8 billion in 2013, had about 1,100 locations at the time, with plans to reduce that number.

“I am sure they will focus on eliminating as many overlapping locations as they can,” said Glass. “I think they are the kind of business people that will get significant synergies out of this.”

The deal was expected to close as early as the end of October, but at press time it hadn't been announced.

Lincare has been quietly making acquisitions, including the HME and respiratory assets of Rochester Hills, Mich.-based Wright & Filippis in June 2014.

AHP has reportedly been on the market since last year. The Deal, a publication that offers new and analysis about M&A, reported in December 2014 that AHP had retained Jeffries & Co. to explore a sale.