UnitedHealth Investors Cheer Long-Delayed Approval to Acquire Doctors Network

Josh Nathan-Kazis June 20, 2019 10:26 am ET

Analysts are cheering the long-delayed completion of UnitedHealth Group ’s acquisition of a large physician group from DaVita , another step in the consolidation of the health-care industry.

A year and a half after the deal was announced, the Federal Trade Commission on Wednesday finally cleared the $4.3 billion purchase, on the condition that the company sell certain clinics in Nevada. The move brings hundreds of clinics and dozens of urgent-care centers under the mammoth health-insurance company’s corporate umbrella.

Analysts, meanwhile, signaled relief. “This seems like a favorable outcome given a very lengthy FTC review…that raised concerns the FTC might seek to block the entire deal,” wrote Matt Borsch, an analyst at BMO Equity Research. Borsch kept his Outperform rating on the stock.

Ana Gupte at SVB Leerink also rates the stock Outperform. She wrote that she was “more positive on UNH after completion of the DaVita deal. We expect the long awaited announcement to be a positive catalyst for the name.”

The back story. In December 2017, UnitedHealth Group (ticker: UNH) subsidiary Optum announced its acquisition of DaVita’s  (DVA) physician group, called DaVita Medical Group, for $4.9 billion, a figure that was later revised down to $4.3 billion. DaVita also operates a large network of dialysis clinics. The acquisition has been held up in regulatory stasis ever since.

What’s new. Approval of the acquisition relieves fears that the FTC would block it altogether.

“We are excited to take this important step in building a next-generation comprehensive, coordinated health care organization,” Optum CEO Andrew Witty said in a statement.

Looking forward. Cantor Fitzgerald analyst Kyle Mikson reiterated his Overweight rating on UnitedHealth group after the FTC announcement. “DMG will likely contribute at least $4 billion in annual revenue (after the divestiture) to the OptumHealth segment, and there is some overlap with UNH’s insurance businesses in various markets,” he wrote.

UnitedHealth shares rose 0.3% to $251.04 early Thursday after gaining 1.8% on Wednesday. Shares of DaVita were up 3% to $52.81, while the S&P 500 was up 1%.

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