US Govt Sues To Block UnitedHealth’s $13B Change Healthcare Deal

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The Biden administration is freshly on its antitrust crusade. This time, the US Justice Department, along with two state Attorneys General, is suing to block a mega-deal in the healthcare industry; the sale of Change Healthcare (NASDAQ: CHNG), a healthcare payments and analytics company, to UnitedHealth Group (NYSE: UNH), a healthcare insurance giant.

In January 2021, Optum, a UnitedHealth subsidiary, struck a deal to acquire Change Healthcare. The sale was to see Change Healthcare, a leading healthcare insurance technology provider, join forces with UnitedHealth, America’s largest health insurer. Optum agreed to pay around $8bn in cash and assume $5bn of debt, totaling $13bn.

  • The US Justice Department and the Attorneys General of New York and Minnesota have filed a civil lawsuit to stop UnitedHealth from buying Change Healthcare on antitrust grounds. They’re arguing that the deal will harm competition in the health insurance markets, a reasonable view.

 

  • Change provides the technology for processing insurance claims to many UnitedHealth rivals. Hence, buying it would give UnitedHealth access to important information on competitors that it usually wouldn’t have. Also, a combined UnitedHealth-Change Healthcare would significantly control the market for healthcare claims editing technology.

 

  • “If America’s largest health insurer is permitted to acquire a major rival for critical health care claims technologies, it will undermine competition for health insurance and stifle innovation in the employer health insurance markets,” U.S. Attorney General Merrick Garland said in a statement.

 

  • The US Justice Department and the state Attorneys General are hoping to block UnitedHealth’s proposed deal from passing through. They filed the lawsuit in the U.S. District Court for the District of Columbia. As usual, all involved parties will be granted their time in court, and the final decision will rest on a judge.

The Biden administration has picked up considerably more antitrust cases than the previous Trump administration, and mergers & acquisitions have been a primary target. Notable acquisitions that got caught up in its nets include;

  • Aon’s $30bn purchase of insurance rival Willis Towers Watson (called off).

 

  • Penguin Random House’s $2.2bn purchase of rival book publisher Simon & Schuster (trial scheduled by August).

 

  • Lockheed Martin’s $4.4bn purchase of missile systems supplier Aerojet Rocketdyne (called off).

 

  • Nvidia’s $40bn purchase of chip design firm Arm Ltd. (called off).

It’s unclear how UnitedHealth will respond to this lawsuit. Often, companies don’t find it worthwhile to face a legal battle with the government, so call off their proposed mergers. In some cases, they proceed to the courts and come out victorious.

 

  • UnitedHealth is America’s largest health insurer and second-largest healthcare company. It reported a whopping $288bn in revenue in 2021. On the other hand, Change Healthcare is a considerably smaller company, with $3.4bn in 2021 revenue.

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