A U.S. federal judge dismissed anti-competitive claims against UnitedHealth Group’s (NYSE:UNH) planned acquisition of Change Healthcare, Inc. (NASDAQ:CHNG). UNH had proposed to acquire Change in an all-cash deal valuing $8 billion and assuming $5 billion of debt.
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The acquisition was announced in January 2021 and has been on hold owing to certain regulatory approvals. In February 2022, the Justice Department alleged that the combination of both entities would result in a monopoly, thereby increasing healthcare costs, as well as giving an unfair advantage and access to competitors’ data.
On September 19, the judge issued a one-page document, disapproving the Justice Department’s claims and allowing UNH to continue with its planned acquisition. Following the news, CHNG shares jumped 7.2% in after-hours trading.
Furthermore, the Judge’s approval is contingent on the proposed divestiture of the claims processing segment, ClaimsXten, by the merged company. In April 2022, CHNG announced that it would sell ClaimsXten to TPG Capital for $2.2 billion cash if the merger with UNH goes through.
Notably, the Judge is expected to release an edited public version of the ruling soon, as he believes the document “may contain competitively sensitive information,” a WSJ report stated.
Following the ruling, a UnitedHealth spokesman said, “We are pleased with the decision and look forward to combining with Change Healthcare as quickly as possible so that together we can continue our work to make the health system work better for everyone.”
Meanwhile, unhappy with the Judge’s ruling, the Justice Department’s top antitrust official, Jonathan Kanter, said, “Protecting competition and access to affordable healthcare is of the utmost importance to the antitrust division and the Department of Justice.” The department said it is reviewing the ruling and working on a further course of action.
About UnitedHealth and Change Healthcare
UnitedHealth is one of the world’s largest healthcare and insurance companies and is set to become even bigger by acquiring Change Healthcare. UNH offers healthcare coverage and benefits services through UnitedHealthcare, and information and technology-enabled health services through Optum.
On the other hand, Change Healthcare is a healthcare technology company that offers software, analytics, network solutions, and technology-enabled services for hospitals. Post-acquisition, Change will be added to UNH’s Optum business.
Is UNH a Buy or Sell?
On TipRanks, UNH stock commands a Strong Buy consensus rating. This is based on nine Buys and three Holds. The average UnitedHealth Group price target of $590.08 implies 12.7% upside potential to current levels. Meanwhile, the stock has gained 5.2% so far this year.
Is CHNG Stock a Buy Right Now?
Currently, on TipRanks, CHNG stock has a Moderate Buy consensus rating. This is based on one Buy versus two Holds. The average Change Healthcare price forecast of $27.08 implies 6.3% upside potential to current levels. Meanwhile, the stock has gained 21.9% so far this year.
Ending Thoughts
Both UnitedHealth and Change Healthcare are masters in their own fields of healthcare. A combination of both entities will result in a better health system and hopefully more affordable services for the masses.
