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UnitedHealth (UNH) to Spend $5.4B on Home-Health Profile Boost
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UnitedHealth Group Incorporated (UNH - Free Report) unit Optum has inked a deal to combine with in-home health services provider LHC Group, Inc. for a total value of $5.4 billion. The transaction includes the acquisition of LHCG’s outstanding common stock for $170 per share. Subject to closing conditions, the deal is expected to be completed in the second half of 2022.
This buyout is anticipated to be neutral to UNH’s guidance for 2022 adjusted net EPS while being modestly accretive to earnings in 2023 and advancing strongly in the following years.
The combination of both companies is expected to result in better health outcomes. Ever since the pandemic has hit the world, demand for in-house care has risen. People now seek treatment from the comforts of their home. Optum chose LHC Group on the basis of its rich history of providing a top-notch, comprehensive at-home care. Moreover, this move continues the evolving industry trend of helping patients avail affordable care. This latest deal is expected to add to Optum’s value-based capabilities, such as home and community care, virtual care, behavioral health and more.
Further Boost in Medicare
As a case in point, the deal will provide UNH with the access to almost two-thirds of the Medicare population in the United States. Optum will be able to focus on value-based care more than ever before.
Post buyout, the LHC Group leadership team will work as part of Optum Health.
Strong Growth of Optum
Optum contributed 41.1% to total 2021 total revenues. The primary growth drivers for Optum are pharmacy care services, care delivery, technology, government services and international portfolio boost. From 2017 to 2021, the segment’s revenues and earnings witnessed a CAGR of 14.3%. Several acquisitions made in this segment, use of advanced technology, market-leading health analytics, modern care delivery and data-driven health approaches lend Optum a long runway for growth. Each sub-segment is expected to deliver a solid performance, driving the overall segment’s growth in turn.
Earlier this month, UnitedHealth acquired Refresh Mental Health, the operator of a vast network of mental health and other centers, per Axios. UnitedHealth is busy in the merger and acquisition space at the moment, with a goal to boost its portfolio and the services basket.
Another peer Humana Inc. (HUM - Free Report) is well-poised for growth owing to its home health and hospice business. HUM purchased a share in Kindred at Home, which helped it deepen its reach in the home health and hospice market. HUM announced its iCare buyout in Wisconsin during 2020, which expanded its Medicare business.
Price Performance
Shares of UNH have rallied 37.2% in the past year, outperforming the industry’s 33% rise.
Based in Holon, Israel, Compugen develops therapeutic and product candidates in the United States, Israel and Europe. In the last four quarters, CGEN’s earnings beat estimates thrice and met the same once, the average surprise being 22%. Shares of CGEN have lost 59.6% in a year’s time.
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UnitedHealth (UNH) to Spend $5.4B on Home-Health Profile Boost
UnitedHealth Group Incorporated (UNH - Free Report) unit Optum has inked a deal to combine with in-home health services provider LHC Group, Inc. for a total value of $5.4 billion. The transaction includes the acquisition of LHCG’s outstanding common stock for $170 per share. Subject to closing conditions, the deal is expected to be completed in the second half of 2022.
This buyout is anticipated to be neutral to UNH’s guidance for 2022 adjusted net EPS while being modestly accretive to earnings in 2023 and advancing strongly in the following years.
The combination of both companies is expected to result in better health outcomes. Ever since the pandemic has hit the world, demand for in-house care has risen. People now seek treatment from the comforts of their home. Optum chose LHC Group on the basis of its rich history of providing a top-notch, comprehensive at-home care. Moreover, this move continues the evolving industry trend of helping patients avail affordable care. This latest deal is expected to add to Optum’s value-based capabilities, such as home and community care, virtual care, behavioral health and more.
Further Boost in Medicare
As a case in point, the deal will provide UNH with the access to almost two-thirds of the Medicare population in the United States. Optum will be able to focus on value-based care more than ever before.
Post buyout, the LHC Group leadership team will work as part of Optum Health.
Strong Growth of Optum
Optum contributed 41.1% to total 2021 total revenues. The primary growth drivers for Optum are pharmacy care services, care delivery, technology, government services and international portfolio boost. From 2017 to 2021, the segment’s revenues and earnings witnessed a CAGR of 14.3%. Several acquisitions made in this segment, use of advanced technology, market-leading health analytics, modern care delivery and data-driven health approaches lend Optum a long runway for growth. Each sub-segment is expected to deliver a solid performance, driving the overall segment’s growth in turn.
Earlier this month, UnitedHealth acquired Refresh Mental Health, the operator of a vast network of mental health and other centers, per Axios.
UnitedHealth is busy in the merger and acquisition space at the moment, with a goal to boost its portfolio and the services basket.
Another peer Humana Inc. (HUM - Free Report) is well-poised for growth owing to its home health and hospice business. HUM purchased a share in Kindred at Home, which helped it deepen its reach in the home health and hospice market. HUM announced its iCare buyout in Wisconsin during 2020, which expanded its Medicare business.
Price Performance
Shares of UNH have rallied 37.2% in the past year, outperforming the industry’s 33% rise.
Image Source: Zacks Investment Research
Zacks Rank & Key Pick
UnitedHealth currently has a Zacks Rank #3 (Hold). A better-ranked stock from the Medical space is Compugen Ltd. (CGEN - Free Report) , holding a Zacks Rank #2 (Buy) at present. 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. In the last four quarters, CGEN’s earnings beat estimates thrice and met the same once, the average surprise being 22%. Shares of CGEN have lost 59.6% in a year’s time.