UnitedHealth Buy Change Healthcare; Street is Bullish

UnitedHealth Group will buy Change Healthcare and merge it with its information and technology-enabled health services business, Optum.

UnitedHealth (UNH) will pay Change Healthcare $25,75 per share in cash, valuing the deal, which is expected to close in the second half of 2021, at more than $13 billion.

As a result of the acquisition, United’s net earnings per share (EPS) is expected to grow by approximately $0.20 and adjusted EPS is set to increase by $0.50 in 2022.

The combination of the companies will simplify services around medical care to improve health outcomes and lower costs by enhancing their offering of software, data analytics, technology and other services to the healthcare industry.

Howard Lance, Chairman of the Board of Directors of Change Healthcare, said, “We are delighted to have in Optum a partner that shares a common vision of creating a better future for health care for the people and communities we serve and see this combination as in the best interests of all of our stakeholders.” (See UNH stock analysis on TipRanks)

Truist analyst David MacDonald reiterated his Buy rating on the stock yesterday and raised his price target from $400 to $420. This implies upside potential of around 22%.

MacDonald expects the healthcare sector to benefit from tailwinds related to site of service redirection, further acceleration in Value-Based Care, relatively benign reimbursement, and a focus on integrated care delivery. He believes that valuations in Healthcare Services are attractive and is anticipating an increase in M&A activity.

Consensus among analysts is a Strong Buy based on 17 Buys and 4 Holds. The average price target of $387.63 suggests that UNH shares have upside potential of around 12% over the next 12 months

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