Shares of Kindred Healthcare (KND) are on the rise after shareholder Brigade Capital expressed opposition to the company’s proposed buyout by a consortium that includes Humana (HUM). Earlier this month, a Deutsche Bank analyst had also argued that a sale price of $9 per share was low for Kindred.

BUYOUT PRICE ‘UNDERVALUES’ SHARES: Brigade Capital has disclosed a 5.8% stake in the hospital, nursing center and assisted living facility operator and expressed opposition to the company’s proposed buyout by TPG Capital, Welsh, Carson, Anderson & Stowe, and Humana. Representatives of Brigade intend to engage in discussions with Kindred’s management and board regarding, among other things, the company’s strategic alternatives and direction, and strategies to enhance shareholder value, including regarding the recently announced proposed acquisition. On December 27, Brigade delivered a letter to the board stating its opposition to the takeover and noting the “material inadequacy of the terms of the proposed transaction.” Brigade’s belief is that the $9.00 per share cash merger price “significantly undervalues” Kindred’s common stock. Brigade believes it is premature for Kindred to engage in a sale transaction given that over the past year the company “has overcome numerous challenges and calmed most of the headwinds against its business, positioning it for substantial stock price appreciation in 2018 and beyond.” The activist added that it “believes management has chosen to pursue a transaction with the consortium that “ensures that the consortium – rather than existing shareholders – will reap the benefits of the value enhancement the improved business is expected to generate.”

TAKEOUT PRICE TOO LOW: Earlier this month when reports of a buyout emerged, Deutsche Bank analyst Chris Rigg told investors in a research note that he felt a sale price of $9 per share was low. The analyst noted that he has always held the view that Kindred’s shares could be worth substantially more over time if management could navigate the Medicare reimbursement challenges in the LTACH business. More importantly, he argued that any investor buying Kindred over the last year generally understands the levered equity dynamic and likely would see Kindred’s takeout value well above the $9 price. Overall, Rigg pointed out that his sum-of-the-parts analysis continued to show a much higher valuation, around $15 per share.