UnitedHealth (UNH) to Acquire Amil in $4.9B Deal

October 8, 2012 6:47 AM EDT
UnitedHealth Group (NYSE: UNH) and Amil Participações S.A. (BM&FBOVESPA: AMIL3) announced today that the companies have agreed to merge, bringing together two leading organizations with the broad scale, distinctive resources and advanced technology to help modernize the performance of the health systems and serve the health care needs of consumers in their markets in the Americas.

Amil is Brazil’s largest health care company, providing health and dental benefits, hospital and clinical services, and advanced care management resources to more than 5 million people. Outside the United States, Brazil is the largest and fastest growing private health care market in the Americas.

UnitedHealth Group is the largest health benefits and services company in the United States and a leader in innovative approaches to improving consumer health and advancing the health care system.

Supported by an economy with average GDP per capita growing at a compound annual rate of 19.4 percent since 2003, and a GDP per capita almost 2.5 times that of China, demand for private health care coverage continues to rise in Brazil. Private health benefit membership rose from 35 million people in 2005 to nearly 48 million in 2011, but still serves only about 25 percent of the population, compared with nearly 80 percent penetration in the U.S.

Amil uniquely in Brazil offers a full range of health benefits products across an array of price points, as well as robust dental benefits. Amil’s 2012 annualized revenues, in the range of $5 billion, represents an increase of 15 percent over 2011. The company’s market position has been built through a focus on innovative products, responsive service, strong brands, and affordable access to private health care delivery resources.

Amil operates a distinctive care delivery model, which efficiently integrates health benefits with care services on a selective basis. Its owned delivery network includes 22 hospitals and nearly 50 clinics, plus a number of leading specialty and preventive care outpatient clinics and emergency care centers. Amil maintains the largest care network serving Brazil, including 44,000 doctors, 3,300 hospitals, nearly 11,000 outpatient clinics and 12,000 ancillary service facilities. The combination of patient-focused disease management programs, effective alignment with and direction of patients to clinical centers of excellence for complex procedures, and the performance of its integrated network have consistently produced superior clinical outcomes and cost performance.

Transaction Details

UnitedHealth Group intends to acquire 90 percent of the 359 million outstanding common shares of Amil for approximately $4.9 billion in cash. This includes realizable Brazilian tax benefits worth an estimated present value of $600 million, bringing the effective equity purchase price to approximately $4.3 billion.

The purchase will be completed in two steps. Upon Brazilian regulatory approval, expected in the fourth quarter of 2012, UnitedHealth Group will purchase approximately 60 percent of the outstanding shares from controlling shareholders and management and, in the first half of 2013, will advance a tender offer to purchase approximately 30 percent from public shareholders. Amil’s founder, Dr. Bueno, and his partner, Dr. Dulce Pugliese, currently control approximately 70 percent of the shares and will retain the remaining 10 percent for at least five years. Amil’s CEO has further committed to investing approximately $470 million in UnitedHealth Group shares and holding those shares for the same five year term.

The combination is expected to be slightly accretive to UnitedHealth Group’s earnings per share in 2013. UnitedHealth Group expects its debt to total capital ratio to rise temporarily to approximately 36 percent at the end of the year, but return to below 35 percent by the end of the second quarter of 2013. UnitedHealth Group remains committed to the forward development of its dividend policy. Its share repurchase program will continue, paced to accommodate acquisition funding and capital ratio objectives.

Amil’s Founder Continues to Lead Company and Joins UnitedHealth’s Board

Amil’s founder, Dr. Edson Bueno, will continue to lead the company as chairman and CEO, and the experienced Amil leadership team will continue in their current positions. In addition, Dr. Bueno will bring his experience and knowledge of international health care and integrated care systems as a new member of UnitedHealth Group’s board of directors upon the transaction’s close.

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