UnitedHealth Group’s (NYSE: UNH) path to acquire Change Healthcare (Nasdaq: CHNG) was cleared Monday as a federal judge denied the U.S. Department of Justice (DOJ) from blocking the pending transaction.
That is not only a massive win for UnitedHealth Group on that front, but also on its pending acquisition of the home health provider LHC Group Inc. (Nasdaq: LHCG), which has also garnered attention from the Federal Trade Commission (FTC).
The UnitedHealth Group-Change Healthcare deal is the larger of the two, as the former intends to purchase the latter for $13 billion. Meanwhile, UnitedHealth Group’s Optum intends to embed LHC Group into its network after that $5.4 billion deal.
The Nashville, Tennessee-based Change Healthcare is a health care technology, insights and data platform. Broadly, the deal was originally considered anti-competitive, according to regulators. Given Change Healthcare’s make up – a large company with massive amounts of health care data – DOJ became dubious of the impact the acquisition would have.
Specifically, the DOJ argued that Change Healthcare’s data sets included UnitedHealth Group’s rival insurers’ information, which could result in an unfair advantage.
The trial took place last month, with the ruling coming down Monday. Judge Carl Nichols also ordered UnitedHealth Group to proceed with its previously proposed divestiture of Change Healthcare’s ClaimsXten payment software to TPG Capital, which could ease the anti-trust complications.
“We respectfully disagree with the court’s decision and are reviewing the opinion closely to evaluate next steps,” Assistant Attorney General Jonathan Kanter said in a statement.
Though the LHC Group deal was announced all the way back in March, the news is likely being celebrated by the company for a couple of reasons. Regulators’ case against the Change Healthcare deal was seemingly stronger, so the likelihood of the LHC Group deal being nixed is now minimized.
Secondly, the Change Healthcare deal was originally announced in January 2021, meaning the deal is going to take nearly two years to close officially. Leaders from LHC Group – for a variety of reasons – probably do not want to wait that long for theirs to be finalized.
“The Judge’s decision in the Change Healthcare case may potentially influence the DOJ to consider moderating, at least to some degree, the more aggressive and activist posture it has considered, under the Biden administration, towards health care M&A,” Stephens analyst Scott Fidel wrote in a note. “As a result, in near-term trading, we would anticipate seeing a tightening of the current deal spread on UnitedHealth Group’s pending acquisition of LHC Group, as a direct implication of Judge Nichol’s ruling allowing the Change Healthcare acquisition to move forward.”
In addition to LHC Group and Change Healthcare, UnitedHealth Group has also been active in other areas of M&A over the last few years. Its other transactions include Refresh Mental Health, Kelsey-Seybold Clinic and Healthcare Associates of Texas.
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