Acquisition Furthers UnitedHealth Growth in West, Medicare
Minnesota-based UnitedHealth Group on Monday announced an agreement to acquire Nevada-based Sierra Health for $2.6 billion in an effort to expand operations in the West and Medicare business, the Wall Street Journal reports. Under the agreement, UnitedHealth will acquire Sierra for $43.50 per share in cash, a 21% premium over the price of Sierra shares at the end of Friday.
According to the Journal, the acquisition will provide UnitedHealth with access to the "fast-growing" Nevada market and with "more clout" in negotiations with physicians and hospitals in the state (Fuhrmans, Wall Street Journal, 3/13).
UnitedHealth will obtain 56% of the health insurance market in Las Vegas and 43% of the market in Nevada through the acquisition, according to the American Medical Association (Forster, St. Paul Pioneer Press, 3/13).
In addition, UnitedHealth hopes to increase sales of specialty products, such as dental and vision coverage, through the acquisition (Wall Street Journal, 3/13).
According to UnitedHealth, the acquisition will increase enrollment in plans under Medicare and other public health care programs by 320,000 (Bloomberg/New York Times, 3/13). The acquisition also will increase enrollment in commercial plans by 310,000, UnitedHealth said (AP/Wilmington News Journal, 3/12).
Sierra CEO Anthony Marlon and his management team will lead UnitedHealth operations in Nevada. The acquisition, expected to close by the end of the year, requires approval from Sierra shareholders; federal regulators; and regulators in Nevada, California and Texas (Krauskopf, Reuters, 3/12).
Larry Matheis, executive director of the Nevada State Medical Association, said state regulators likely will examine the acquisition "closely," adding, "Any time you see a consolidation that approaches 50% of a market, there are all sorts of concerns that are immediately raised, and this would actually exceed that in the Las Vegas market." He said, "If this goes through, it will be a significant change in the health care system in Nevada" (St. Paul Pioneer Press, 3/13).
Sheryl Skolnick, an analyst at CRT Capital Group, said, "The deal makes sense to us and fills a hole in (UnitedHealth's) coverage area: If (United Health's) goal is to be a truly national plan, it needed (Sierra), just as it needed California and PacifiCare."
David Heupel, a portfolio manager for the Thrivent Large Cap Growth Fund, said, "Sierra has a lot of exposure in Las Vegas, and that is one of the fastest-growing urban markets in the country. It's one thing to grow organically when you're not the dominant player, but if you really want to get into a market, you have to do it this way" (Phelps, Minneapolis Star Tribune, 3/12).