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UnitedHealth (UNH) Arm Optum Acquires Refresh Mental Health

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UnitedHealth Group Incorporated’s (UNH - Free Report) health service business, branded as Optum, recently acquired Refresh Mental Health, the operator of a vast network of mental health and other centers, per Axios. The financial details of the deal are yet to be disclosed.

The acquirer bought Jacksonville Beach, FL-based Refresh from the private equity firm, Kelso & Co. It operates a network of more than 300 outpatient mental health, substance abuse and eating disorder centers. Meanwhile, the acquiree has a presence in 37 states, which will boost UnitedHealth’s footprint.

Refresh was founded in 2017. In December 2020, Kelso reportedly agreed to acquire Refresh at around $700 million. UNH’s acquisition of Refresh is expected to enable its Optum business to better address the rising demand for behavioral health services. The pandemic has triggered demand for behavioral health facilities. Hence, the acquisition deal, which can boost Optum’s efficiency, comes at an opportune time.

UnitedHealth is busy in the merger and acquisition space at the moment, with the goal of boosting its portfolio and services basket. The company is expected to lock horns with the Department of Justice (DOJ) over the $8 billion acquisition of Change Healthcare Inc. (CHNG - Free Report) . The DOJ intends to block the deal as it expects the acquisition to harm competition in the commercial health insurance space.

However, Optum’s subsegment, Optum Insight, intends to acquire Change Healthcare, which will help build a more modern, information and technology-enabled health care platform. The deal is expected to be accretive to UnitedHealth’s net and adjusted earnings per share by 20 cents and 50 cents, respectively, in 2022, thus advancing strongly in the subsequent years.

Price Performance

The company’s shares have rallied 38.3% in the past year, outperforming the industry’s 29.1% rise.

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Zacks Rank & Key Picks

UnitedHealth currently has a Zacks Rank #3 (Hold). Some better-ranked stocks from the Medical space include Compugen Ltd. (CGEN - Free Report) and Galecto, Inc. (GLTO - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Based in Holon, Israel, Compugen develops therapeutic and product candidates in the United States, Israel and Europe. The Zacks Consensus Estimate for Compugen’s 2022 bottom line has improved 28.6% in the past 30 days. In the last four quarters, CGEN beat earnings estimates thrice and met the same once, with an average surprise of 22%.

Galecto creates molecules utilized for treating diseases like inflammation, fibrosis, cancer and others. The Zacks Consensus Estimate for Galecto’s 2022 bottom line has improved 1.4% in the past 30 days. GLTO beat earnings estimates thrice in the last four quarters and missed the same once, with an average surprise of 2.5%.