Humana, Other Potential Buyers of Cano Health Circle

Humanitarian Inc.

HUM 0.67%

and other potential buyers are circling Cano Health Inc.,

CANO 32.17%

according to people familiar with the matter, as health care heavyweights struggle to pull up primary care providers.

The talks are serious and a deal could be made to buy Cano in the next few weeks, assuming the negotiations don’t fall apart, some of the people said. Cano’s shares, which were down nearly 7%, rose positive and they were up. 42% after the Wall Street Journal reported the talks, giving the company a market value of nearly $5 billion.

Miami-based Cano operates primary care centers in California, Florida, Nevada, New Mexico, Texas, Illinois, New York, New Jersey and Puerto Rico, according to company documentation. It primarily serves members of Medicare Advantage, a private sector alternative to Medicare for seniors.

It was not possible to learn who else is in the mix, but Cano may lose out to Humana because the health insurer has the right of first refusal on any sale, part of an agreement originally reached in 2019.

Ties between the companies run deep: Cano was Humana’s largest independent primary care provider in Florida, serving more than 68,000 of its Medicare Advantage members at the end of last year, according to a securities filing. Cano also operated 11 medical centers in Texas and Nevada and Humana is the exclusive health plan for Medicare Advantage, the filing added.

There was a frenzy of deal making with large companies leveraging primary care assets as a way to get closer to patients and provide them with a more personalized service. Amazon.com Inc.

The operator’s parent agreed to buy primary care clinic One Medical for about $3.9 billion in July, and CVS Health Corp.

agreed to buy Signify Health Inc.

for $8 billion earlier this month.

Cano went public in 2020 through a special purpose vehicle backed by real estate investor Barry Sternlicht, who sits on its board. The company was worth $4.4 billion.

Cano has been the target of two shareholders this year, both of whom have pushed independently to sell him. Dan Loeb’s Third Point LLC currently owns about a 5% stake in the healthcare company. In March, he cited the market’s unfavorable view of companies going public through SPACs as a reason to explore other strategic options.

Then in late August, Owl Creek Asset Management LP sent a letter to Cano’s board saying it had amassed a roughly 4% stake and urged the company to hire investment bankers to explore a sale to a strategic buyer.

Cano has been backed by healthcare-focused private equity firm InTandem Capital Partners since 2016. The firm makes investments primarily in small and medium-sized companies.

Write to Laura Cooper at laura.cooper@wsj.com and Dana Cimilluca at dana.cimilluca@wsj.com

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