Quick Pitch: Enhabit (EHAB)

Higher offer: upside TBD (at $13.98)

I have yet to meet anyone who doesn’t love a “heads I win, tails I don’t lose much” setup, and this fits the bill perfectly. We have a signed deal with a reputable buyer, plus a confirmed competing party that has already submitted two higher offers. The downside is very close to zero, so the upside optionality of a higher bid comes almost for free.

Enhabit provides in-home medical care, allowing patients to avoid hospital or nursing facility stays. It is the last publicly listed pure-play in the home health and hospice sector, as all major peers have been taken out in recent years amid industry consolidation. Enhabit was spun off from EHC in 2022, and many, including activist Arex Capital, expected a sale once the two-year safe harbor period expired in 2024. I’ve previously highlighted the situation here. It has taken longer than expected, but the company is finally getting sold.

In February, EHAB announced a takeover by Kinderhook Industries at $13.80/share. Kinderhook is a reputable PE firm focused on the healthcare space. The spread settled at a tight 1.5% as the market apparently thought it was a done deal, with closing expected in Q2’26. At the end of March, EHAB shares suddenly shot up above the offer price. The reason was that the merger proxy’s background section revealed two higher competing offers, one submitted just before and another shortly after the Kinderhook deal announcement. The first offer came in at $14.50/share, while the second was not disclosed but described as “in excess” of $14.50. The background section contained several other interesting tidbits, so the situation is best understood through a brief timeline. For context, the Kinderhook deal was announced on February 23.

• January 31: Kinderhook offered $12.50/share in cash plus a CVR of up to $1.50 tied to potential litigation proceeds. This already represented its third increase from the initial $8.75/share bid in July 2025. As for the litigation, it remains ongoing and alleges that EHAB’s former executives, along with certain PE firms, used company resources to build a competing business.
• February 4: Party G sent an unsolicited, non-binding offer at $13.00/share based solely on publicly available information.
• February 7: Party G was granted due diligence access.
• February 13: Party G raised its bid to $14.50/share but noted it would need 4 to 6 weeks to complete diligence.
• February 18: Kinderhook made a “best and final” offer of $13.35 plus a CVR.
• February 18-19: The board determined that Party G’s proposal carried meaningful risks, including a lengthy diligence timeline, limited experience integrating companies of similar size, higher regulatory complexity, and a lack of committed financing. As a result, it chose not to pursue Party G over Kinderhook. However, it continued facilitating Party G’s involvement, granted access to additional competitively sensitive due diligence information, and declined to provide Kinderhook with exclusivity.
• February 20-21: Kinderhook, despite calling the previous offer “best and final,” bumped its bid to $13.80 with no CVR. I consider this a raise because the board viewed the CVR as having “minimal value” since Kinderhook wanted to keep two-thirds of the litigation proceeds for itself and slapped a 5-year deadline on the payout. The board had ultimately preferred to maximize upfront cash over the CVR.
• February 23: The acquisition by Kinderhook at $13.80/share was announced publicly.
• March 7: Party G delivered a new offer “for a per share price in excess of its February 13, 2026 proposal.” It also provided draft financing commitment letters.
• March 10-13: Party G and the board met to seek clarifications on financing, regulatory analysis, and other details. The board determined that Party G’s offer could lead to a “Superior Proposal.”
• March 26: After representatives of Party G failed to attend two scheduled diligence meetings without notice, Party G formally withdrew from the process, prompting Enhabit to revoke its data room access.
• March 27: Party G contacted EHAB again to indicate they had reconsidered and were once again interested in pursuing a transaction, though no new proposal was provided.

It’s a shame the background section ends on a cliffhanger, leaving it unclear whether management ultimately re-engaged with Party G. The latest developments were also quite unusual: Part G stopped coming to negotiations, withdrew from the process, and then returned just a day later. The reason wasn’t disclosed, but there could be a number of possible explanations, including a temporary financing issue (e.g. lenders pulled back and Party G had to reassemble the funding) or some internal drama at Party G.

However, the competing bidder did return, which suggests the issue was fixed, and I think there’s a good chance negotiations might’ve resumed. EHAB had already deemed the latest proposal potentially superior, and aside from that brief wobble, Party G looks like a credible bidder. It has already raised its bid twice, provided draft financing commitment letters, and continued to pursue the transaction even after a definitive agreement with Kinderhook was signed.

There’s still a path for Party G to win this deal, and we already know that in this scenario the final bid would be above $14.50/share. The latest undisclosed offer must have been a meaningful raise, not just a token bump, as it led the board to deem it potentially superior even after signing a definitive agreement with Kinderhook and despite having previously rejected $14.50.

A buyout in the $15 to $15.50/share range looks like a possible final outcome. That implies 8%-10% upside over the next few months.
If no bump materializes, EHAB would likely revert to the $13.60/share level where it traded before the background details surfaced. That puts the downside at 0.8%-2.4%, depending on whether you hold through closing this quarter. Heads I win, tails I don’t lose much.

To add some color on the downside protection, EHAB received other bids in a similar range during the sale process. Party E offered $13.50/share and expressed openness to a CVR, though it ultimately withdrew for undisclosed reasons. Party F offered $13.00/share but ultimately decided to wait for the litigation outcome. In the highly unlikely event that the Kinderhook deal breaks and Party G’s offer falls through, there is a chance these other bidders could re-engage.

Putting on a tinfoil hat for a second, another bump from Kinderhook isn’t totally off the table either. It is a motivated buyer, having already raised their bid five times. They even bumped a “best and final” offer, which is highly unusual and not exactly a great look reputationally. But it clearly shows clearly how badly Kinderhook wants EHAB. The proxy background shows it was really sweating the competition. When Kinderhook bumped the bid to $13.80/share, it also agreed to reduce Enhabit’s termination fee just to kill the go-shop period and drop the CVR component:

On February 21, 2026, Kinderhook orally informed representatives of Goldman Sachs that it was increasing its offer to $13.80 per share and agreeing to reduce the termination fee payable by Enhabit upon certain termination events to 3.3% of the equity value of the transaction in exchange for the removal of the CVR and the go-shop provision in the Merger Agreement, given that Enhabit had pursued discussions with multiple other potential counterparties.

The termination fee payable by Enhabit was set at $24.5m (including in case of a superior proposal), roughly half the $44.6m reverse break fee payable by Kinderhook. The buyer basically cut Enhabit a great deal just to kill the go-shop and lock up the agreement ASAP, which they finalized just two days later.

Kinderhook is a financial buyer with solid experience in the home health space. It previously owned Trilogy Home Healthcare (home health operator in Florida) and exited it in 2023. Trilogy was described as a multi-year platform build featuring “nine add-on acquisitions.” The industry is highly fragmented, so Kinderhook might be looking to use EHAB as a foundation to build another platform while the broader sector is struggling with regulatory and changing customer mix headwinds.

Party G, on the other hand, sounds like a strategic buyer. The proxy specifically noted a “higher degree of regulatory complexity than a transaction with Kinderhook.” Directionally, it makes perfect sense that a strategic player could extract more synergies and ultimately outbid Kinderhook.

I’ll admit I can’t offer much insight into the valuation of Enhabit, and I’m playing this mostly as a downside-protected event trade. It’s a complex industry that heavily relies on healthcare reimbursement regulations, and there has been quite a bit of turbulence there lately. From a high level, though, it seems there is headroom for higher bids.

EHAB is being acquired at roughly 10x LTM adj. EBITDA. That EBITDA figure has been beaten down over the last few years due to a broad industry shift from traditional Medicare to lower-margin Medicare Advantage plans. As a result, revenues flatlined, and EBITDA dropped from $150m in 2022 to $100m in 2024. It already started to bounce back last year to $109m, and the proxy shows management expects it to return to 2022 levels in two years. At those projected levels, the acquisition multiple drops to just 7.5x.

EHAB’s peers were all acquired at higher multiples. Amedisys was bought out at 13.8x NTM EBITDA in a deal that closed in August 2025. Kindred at Home went for 12x in 2022, and LHC Group (the largest player) commanded a massive 21x NTM multiple back in 2022. Granted, these were all larger companies than EHAB with revenue mixes slightly more tilted toward hospice services, which are generally considered less risky from a regulatory standpoint.

The merger proxy included even more comparable transactions, but all of the were also done at 11x+ LTM EBITDA:

EHAB is quite levered. Because of that, even a bump of one LTM EBITDA turn would push the bid to $15.50/share. If management’s projected earnings rebound actually materializes, there is clearly room for higher bids. Ultimately, it looks like there’s a decent chance the company will sell for a higher price, and we are getting that upside optionality basically for free right now.

More background on EHAB’s business can be found in this VIC pitch.