Maybe the management team at UnitedHealth Group (NYSE: UNH) has been watching Dancing With the Stars and really liked the samba. The large U.S. insurer just announced plans to acquire Brazil's largest health-care organization, AmilParticipacoes S.A. <\/p>\n
Terms of the $4.9 billion deal call for UnitedHealth to conduct two transactions. The first will be to buy the 60% stake currently held by controlling shareholders. The second will be to extend a tender offer to buy 30% more from public shareholders. All of this depends, though, on approval by Brazilian regulators. UnitedHealth expects to gain this approval in fourth quarter this year. <\/p>\n
What it meansUnitedHealth was already the largest health insurer in the U.S. ranked by market value. Now, it can lay claim to being the largest health-care organization in all of the Americas. <\/p>\n
The move makes sense financially. Brazil represents the largest and fastest-growing market for private health care in Latin America. The country has a growing middle class and boasts a per-capita GDP that's 2.5 times that of China. While 80% of the U.S. population uses managed care, only around 25% of Brazil's population does so. <\/p>\n
By scooping up Amil, UnitedHealth gains instant access to a well-established provider network and membership base. Amil currently serves more than 5 million members in Brazil. The company's network includes 44,000 doctors and 3,300 hospitals. Amil owns 22 hospitals and nearly 50 clinics. <\/p>\n
Amil's revenue doubled over the last three years to $5 billion. While that's a drop in the bucket compared with the $101.8 billion for UnitedHealth last year, expansion into Latin American markets should lead to higher revenue down the road. <\/p>\n
UnitedHealth expects the acquisition to be slightly accretive to 2013 earnings. The company projects that its debt to total capital ratio to rise a little to 36% temporarily but then go back below 35% by mid-2013. <\/p>\n
Looking aheadMore international expansion could be the wave of the future for managed-care companies.Cigna (NYSE: CI) maintains a footprint in 30 countries and expanded into India last year through a joint venture. <\/p>\n
Aetna (NYSE: AET) had already operated in Europe, Asia, and the Middle East prior to announcing the hire of a general manager to oversee its Americas expansion earlier this year.WellPoint (NYSE: WLP) , on the other hand, doesn't have much of an international presence. The company's expansion plans focus on the U.S. with its announced merger with Amerigroup (NYSE: AGP) . <\/p>\n
Regardless of what the competition does, UnitedHealth's acquisition of Amil should prove to be a good move. Investors seem to have given high marks to the news, with shares up around 1% in intraday trading Monday on a day that the overall markets declined. <\/p>\n<\/p>\n
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Health Care Dances the Samba<\/a><\/p>\n","protected":false},"excerpt":{"rendered":" Maybe the management team at UnitedHealth Group (NYSE: UNH) has been watching Dancing With the Stars and really liked the samba. Continue reading