(Reuters) - Humana Inc is teaming up with two private equity firms to buy privately held Curo Health Services for about $1.4 billion (1 billion pounds), the group's second such deal in five months that will create the largest hospice operator in the United States.
The consortium, which includes TPG Capital and Welsh, Carson, Anderson & Stowe, will merge Curo with the hospice business of Kindred Healthcare Inc, which it agreed to buy in December for about $810 million.
This is the latest deal in a rapidly consolidating healthcare sector, with companies looking for new ways to bolster profits as the industry faces greater scrutiny for rising healthcare costs.
Reuters reported last month that Walmart Inc was in early-stage talks with Humana for developing closer ties, with the acquisition of Humana being discussed as one possibility.
"We view the (Curo) acquisition as financially prudent for Humana but without a majority ownership position, achieving its operational goals could be more challenging," Cantor Fitzgerald analyst Steven Halper wrote in a note.
The deal indicates that Humana should not be viewed as a takeover target, Halper added, saying that a deeper relationship between Humana and Walmart is entirely possible.
Humana's insurance business is focussed on individuals in the U.S. government's Medicare programme for the elderly and the disabled. The deals builds on Humana's focus on using healthcare providers in members' homes to improve patient care and save costs.
Soaring healthcare costs have been a national issue, and the federal government has been restricting spending for healthcare, putting pressure on insurers.
Last year, Aetna Inc announced a $69 billion deal to be bought by CVS Health Co, fuelling interest in how smaller rival Humana will compete.
Humana will get a 40 percent interest in Curo and the deal is anticipated to close in summer.
Evercore is the exclusive financial adviser to Humana. Fried, Frank, Harris, Shriver & Jacobson LLP and Manatt, Phelps & Phillips, LLP are legal advisers to Humana.
Debevoise & Plimpton LLP and Mintz Levin are legal advisers to TPG and WCAS. Ropes & Gray LLP is also acting as legal adviser to WCAS.
Jefferies LLC is the exclusive financial adviser and Kirkland & Ellis LLP legal adviser to Curo.
(Reporting by Ankur Banerjee in Bengaluru; Editing by Saumyadeb Chakrabarty)