UnitedHealth Group Inc will buy control of Amil Participacoes SA, Brazil’s largest health insurer and hospital operator, for $4.9 Â billion, making a bold move into a fast-growing market as challenges mount for its U.S. business.
The Brazilian healthcare market has been bolstered by a growing middle class and is turning to managed care to meet demand. It is Â expected to grow twice as fast as the U.S. market, UnitedHealth Chief Executive Stephen Hemsley said during a conference call Â recently.
â€œIt looks to us like the potential the U.S. market had 20 or more years agoâ€, Hemsley said. The purchase marks UnitedHealth’s first foray to become a hospital owner and is the largest overseas acquisition by a U.S. managed care company yet, according to Thomson Reuters data. For the moment, UnitedHealth is likely to stand alone overseas as competitors catch up at home, analysts said.
United is by far the largest and most diversified player in the U.S., and so from a strategy point of view they are closer to this point than others, said David Windley, an analyst for Jefferies & Co.
Rival U.S. health insurers are busy managing their own recent deals, so are unlikely to try to expand, he said. In the past few years, the industry has seen a series of multibillion-dollar takeovers in its home market, including Aetna Inc’s $5.6 billion buy of rival Coventry Health Care Inc and WellPoint Inc’s planned $4.5 billion purchase of Amerigroup Corp.
Those deals aim to capitalize on expected growth in the U.S. government’s Medicaid and Medicare programs for the poor and the elderly. But insurers are also under pressure in the nearer term as those programs cut reimbursement rates and competition grows among health plans serving employers.
UnitedHealth said it would buy a 90 percent stake in Amil.
The deal price â€“ 30.75 reais per Amil share – represents a premium of 22 percent. Amil shares were up 14 percent at 28.85 reais on the Sao Paulo stock exchange. UnitedHealth shares gained 0.9 percent to $57.65 on the New York Stock Exchange.
Amil founder and Chief Executive Edson Bueno and partner Dulce Pugliese will retain the remaining 10 percent stake in the company for at least five years. Their current stake is 70 percent.
Bueno, who will stay in his job, will also buy $470 million worth of UnitedHealth shares, making him the single largest investor in the company.