A wholly owned subsidiary of UnitedHealth Group Inc. UNH has signed a definitive purchase agreement and is set to launch a tender offer for Empresas Banmédica — an initial step toward acquiring the Chilean company.
The deal, valued at nearly $2.8 billion, will enhance UnitedHealth’s footprint in South America. The transaction is expected to close in the first quarter of 2018, subject to customary terms and conditions.
UnitedHealth already has a presence in South America, backed by its acquisition of Amil Participacoes SA in 2012, which made the former an operator of hospitals and clinics in Brazil.
The above-mentioned deal will likely be beneficial for UnitedHealth, given Banmedica’s 25-year expertise in Latin America with the largest private health groups in Chile, Colombia and Peru. Further, this acquisition will boost UnitedHealth’s international operations.
Diversifying geographically is one of the crucial long-term growth strategies of the company at a time when stringent and uncertain regulations are adversely impacting the U.S. healthcare industry.
Pressure on profit margins in the U.S. market has compelled American health insurers to target foreign markets for continued growth and profitability, since these markets are less penetrated and offer more competition. Notably, Asia and Europe provide the best near-term opportunities for U.S. health insurers.
Cigna Corp. CI and UnitedHealth Group lead the private health insurance industry in terms of international deals, followed by Aetna Inc. AET and Humana Inc. (HUM). These deals are either mergers and acquisitions, or joint ventures with local insurance companies.
Some of the deals made by the players in this field reflect the emerging trend of globalization. Recently, Aetna acquired U.K.-based Bupa Group’s Thai business — Bupa Thailand — which will significantly fortify the presence of the former in Asia. Earlier, it had bought U.K.-based company, InterGlobal, which offers private medical insurance to groups and individuals in the Middle East, Asia, Africa and Europe.
Another insurer, Cigna, operates in India through a joint venture with TTK Group.
Notably, UnitedHealth seems focused on achieving fast-paced growth and mergers and acquisitions remain its top priority. In 2017, the company made a number of acquisitions in its health services segment — Optum. The latest deal includes the buyout of DaVita Medical Group — a unit of DaVita Inc. DVA — which was announced early this month.
Expansion of the Optum segment remains one of its primary goals, followed by growth of international operations.
In last six months, the stock has gained 20%, outperforming the industry’s growth of 18%.
UnitedHealth currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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