Health insurer UnitedHealth Group (UNH.N) on Wednesday agreed to buy Change Healthcare (CHNG.O) for $7.84 billion in an all-cash deal, as it looks to expand its fast-growing healthcare technology business.
UnitedHealth will pay $25.75 per Change Healthcare share, a premium of 41.2% to Tuesday's closing price. Shares of Change, which will merge with UnitedHealth unit Optum, were trading near the offer price at $23.88.
Change Healthcare, which is 20% owned by Blackstone Group (BX.N), provides billing and payment process services to more than 2,000 payers and 1 million providers, according to Citi.
Its acquisition is expected to close in the second half of 2021 and add to UnitedHealth's adjusted earnings per share by about 50 cents in 2022.
"The array of services provided by Change would appear to supplement and complement many of the services offered by UnitedHealth's OptumInsight division," J.P. Morgan analyst Gary Taylor said.
However, the brokerage pointed out possible antitrust implications, as the number of services provided by Change could make it "really difficult to contemplate how the Federal regulators will define relevant markets".
It expects UnitedHealth to make the case that the transaction will increase efficiency and transparency for consumers.
Optum offers data, software and services to insurance firms, physicians, hospitals and pharmaceutical companies. The unit accounted for more than half of UnitedHealth's total revenue of $65.1 billion in the quarter ended Sept. 30.
"Overall, the deal foots to UnitedHealth building out its capabilities with Change's data and analytics platform augmenting offerings, and we would expect UnitedHealth to continue using M&A to grow and scale its Optum segments," said analysts at Citi.