Buyer: UnitedHealth's Optum
Seller: DaVita Medical Group
Sector: Healthcare Facilities, Urgent Care, Outpatient Surgery
UnitedHealth to buy DaVita primary care unit for $4.9 billion
(Reuters) – The largest U.S. health insurer UnitedHealth Group Inc will buy DaVita Inc’s primary and urgent care services for $4.9 billion in its second acquisition this year to expand its fast-growing medical group, it said on Wednesday.
Denver-based DaVita operates medical groups in six states that serve 1.7 million patients through about 300 clinics, adding to UnitedHealth’s 250 MedExpress urgent care centers and its 200 surgical centers that are part of recently acquired Surgical Care Affiliates.
Shares in DaVita rose 9 percent, a $193 million gain for billionaire investor Warren Buffett, who owns a 20 percent stake in the dialysis and medical group company. Reuters reported last month that DaVita was exploring a sale of its medical unit. DaVita’s kidney dialysis unit is not included in the deal.
Leerink analyst Ana Gupte said the purchase is likely to add to UnitedHealth earnings per share by 1 percent to 4 percent in 2018 and 5 percent to 7 percent in 2019, the first full year after the deal closes. EvercoreISI analyst Michael Newshal said he thought near-term earnings additions would be close to neutral given the price that UnitedHealth was paying was on the high side. UnitedHealth did not provide any details on the financial impact of the purchase. Its shares gained less than 1 percent to $220.48 on Wednesday, lifting its market capitalization to more than $212 billion.
UnitedHealth bought Surgical Care Affiliates for about $2.3 billion in March. The DaVita acquisition will add 2,200 physicians, nurse practitioners and physicians’ assistants and 15,000 other affiliated providers who serve its patients to UnitedHealth’s Optum unit, which has more than 30,000 physicians who work for or are affiliated with its practices. Optum includes MedExpress urgent care centers, surgical centers from its $2.3 billion March acquisition of Surgical Care Affiliates, pharmacy benefit management and data services as well as a bank.
DaVita will continue to operate DaVita kidney care, which owns or helps manage 2,470 outpatient dialysis centers in the United States.
DaVita’s medical group had $4.11 billion in sales last year, or 30 percent of the total. It had become a major drag on the company’s financial performance in recent quarters as it struggled with low payments from the government’s Medicare Advantage program.
DaVita plans to use the proceeds of the sale for stock buybacks and to repay debt.
UnitedHealth’s Optum to buy DaVita Medical Group for $4.9B: 6 things to know
| December 06, 2017 |
UnitedHealth Group’s Optum unit will acquire DaVita Medical Group for approximately $4.9 billion in cash, adding nearly 300 medical clinics to its network.
Here are six things to know about the deal.
1. Under the agreement, Optum will acquire DaVita Medical Group’s clinics in Florida, California, Colorado, Nevada, New Mexico and Washington, as well as 35 urgent care centers and six outpatient surgery centers.
2. DaVita Medical Group, which serves about 1.7 million patients each year, will join Optum’s OptumCare division, which works with more than 80 health plans to serve millions of people each year through hundreds of care facilities and 30,000 affiliated physicians.
3. The deal, which is subject to regulatory approval, is expected to close in 2018.
4. Following the transaction, the DaVita Medical Group leadership team will have executive roles at the combined company. DaVita plans to use the proceeds from the transaction for stock repurchases over the few years following the closing of the transaction and to repay debt.
5. “The physicians and clinicians of DaVita Medical Group provide outstanding patient care, and we look forward to supporting their continued success in serving their patients and communities,” said Andrew Hayek, CEO of OptumHealth. “We also look forward to working closely with the leadership team of DaVita Medical Group to combine our capabilities and, supported by the data analytics and technology capabilities of Optum, enhancing patient care and the value we provide to the communities we serve.”
6. This is the third major transaction Optum has inked this year. In January, it agreed to acquire Deerfield, Ill.-based Surgical Care Affiliates for approximately $2.3 billion in cash and stock. In November, Optum finalized a deal to acquire Advisory Board’s healthcare consulting business for $1.3 billion.