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Ensign Group to Spin Off Home Health & Hospice Business

Zacks Equity Research

The Ensign Group, Inc. ENSG recently announced that its board of directors has authorized the separation of its home health and hospice business and also all its senior living operations from the parent company into a separate publicly traded entity. The same is subject to certain closing conditions.

On the closure of this spin-off, there will be two different companies, namely The Ensign Group, Inc. that will consist of the transitional and skilled services, rehabilitative care services, healthcare campuses, post-acute-related new business endeavors and real estate investments, and The Pennant Group, Inc., which will comprise the company’s home health and hospice business line and substantially, all its senior living operations.

Ensign Group’s stockholders as of Sep 20, 2019 will get shares of the Pennant common stock on a pro rata basis, effective Oct 1, 2019. They will get a share of Pennant for every two shares owned in the company. Moreover, it is to be noted that no fractional shares will be distributed. A cash payment will be given in place of the same.

With this spin-off, Ensign Group is expected to unlock more earnings prospects and enhance its shareholder value. The company hopes that it will be able to add value to its home health, senior living and hospice business line from this spin-off like it had earlier gained traction from its 2014 CareTrust spin-off.

The home and hospice business has been contributing to the bottom line over the last few quarters, which is evident from its 20% and 22% year-over-year growth in revenues during 2018 and the first half of 2019, respectively.

Management also opines that Ensign Group will not slow down its acquisition activity because of this spin-off. It will continue to seek transactions to acquire real estate and lease both well-performing and struggling skilled nursing, assisted living and other healthcare related businesses in the new and the existing markets.

Shares of this Zacks Rank #2 (Buy) company have rallied 26% against its industry’s decline of 2.4% in the past year.

Other Key Picks

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Molina Healthcare provides managed health care services under the Medicaid and Medicare programs, and through the state insurance marketplaces. The company managed to pull off average four-quarter positive surprise of 66.9%.

Lannett Company works with generic versions of brand pharmaceutical products in the United States. In the last four quarters, the company delivered average beat of 30.6%.

FibroGen discovers, develops and commercializes therapeutics to treat serious unmet medical requirements. In the trailing four quarters, the company came up with average beat of 346.6%.

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