UnitedHealth to Buy Change Healthcare in Massive Deal, Increasing Its Valuation

By Thomas Price Thursday, January 7, 2021

The healthcare industry is rapidly adapting to the continually changing circumstances brought about by the COVID-19 pandemic. The need for change in this industry has resulted in healthcare providers and other businesses to further the progress in technology and data systems as quickly as possible to keep up with demand. UnitedHealth’s recent purchase of Change Healthcare is part of this constant adaptation the company strives for as they look to bolster their own data systems and technology. As the company continues to evolve, what are the details of this major purchase, and what kind of implications does it entail for the near future of UnitedHealth?

UnitedHealth and Change Healthcare

UnitedHealth has agreed to buy Change Healthcare in a deal that values the company at $8 billion. However, when also considering Change Healthcare’s outstanding debt, which totals to around $5 billion, the value of the deal is much closer to $13 billion.

The company plans to pay around $25.75 per share, a price that would represent a significant 41% premium over Change Healthcare’s closing price on Tuesday, January 5, which was only $18.24 per share. The news of the deal boosted Change Healthcare’s stock over 30% alone on January 6, making that premium feel far less overpriced.

As for UnitedHealth, shares of the company were up around 6% all day. UnitedHealth’s purchase seems to mainly consist of bolstering and combining the company’s current work in their OptumInsight unit with Change Healthcare to provide better software, data analytics, and technology, among other services. This should help create a more efficient and simplified system for things such as providing vital information on patient services and securing payments to a number of important subjects, including insurers, health care providers, and the patients themselves.

The deal is set to close sometime in the second half of 2021 with expectations that this will boost UnitedHealth’s earnings by $0.50 per share in 2022 - a fairly significant boost.

In a statement released with the news of the agreed-upon deal, President of UnitedHealth Group and CEO of Optum, Andrew Witty said, “Together we will help streamline and inform the vital clinical, administrative and payment processes on which health care providers and payers depend to serve patients.”

This was followed by remarks from President and CEO of Change Healthcare, Neil de Crescenzo, who said, “This opportunity is about advancing connectivity and accelerating innovations and efficiencies essential to a simpler, more intelligent and adaptive health system.”

Final Conclusions

The business deal agreed upon between UnitedHealth and Change Healthcare looks to be mutually beneficial. This is considering UnitedHealth’s overpay of sorts on the deal and the potential increase in revenue that Change Healthcare can bring to the company. Additionally, the merger can provide further improvements in data systems and technology. If all goes according to plan, this deal will serve UnitedHealth extremely well in 2022, or as soon as its effects take place.

About the Author

Headshot for author Thomas Price

Tom Price is a writer focusing on Entertainment and Sports Features. He has a degree from NYU in English with a minor in Creative Writing. He has been previously published for Washington Square News, Dignitas, CBR, and Numbers on the Boards.

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