America's largest healthcare benefits manager struck a multibillion-dollar cash deal on Wednesday that will make it even larger. UnitedHealth Group (NYSE:UNH) has agreed to acquire Change Healthcare (NASDAQ:CHNG), a data analytics and technology-enabled service provider.
UnitedHealth Group is offering $25.75 for shares of Change Healthcare, a bid that values the company at around $7.8 billion. It also represents a 41% premium above the stock's closing price on Tuesday.
UnitedHealth Group's offer isn't as attractive as some of the deals we saw in 2020, but Change Healthcare shareholders will most likely accept it. That's because the buyer will also take on about $5 billion worth of debt that has been crushing the target's bottom line. Change Healthcare's operations produced a modest profit in the third quarter, but interest expenses led to a $43 million loss for the period.
UnitedHealth Group intends to fold Change Healthcare's operation into its already-successful data and analytics segment, OptumInsight. Once the deal closes, Change Healthcare CEO Neil de Crescenzo will become OptumInsight's chief executive officer.
Hospital systems, medical practices, health plans, governments, and life sciences companies use the services provided by UnitedHealth's OptumInsight segment to help boost their performance. In the first nine months of 2020, OptumInsight earned $1.9 billion -- about 11% of UnitedHealth Group's overall bottom line.
Assuming the deal closes in the second half of 2021 as expected, UnitedHealth Group expects the acquisition to add around $470 million to its adjusted earnings in 2022.