UnitedHealth (UNH) Eyes Signify Health Acquisition: Here's Why

UnitedHealth Group Incorporated UNH is in the race to snap up home health services provider Signify Health, Inc. SGFY, per Bloomberg. Following the report on Sunday, Signify Health shares climbed 32.1% on Monday to $28. The rumored bidding war has pushed SGFY stock to a year-high level.

Per the Bloomberg report, UnitedHealth has competition from Amazon.com, Inc. AMZN, CVS Health Corporation CVS and Option Care Health Inc, which are also trying to acquire the home-health technology and services provider. UnitedHealth is reportedly the highest bidder with more than $30 per share, closely followed by Amazon. While Signify Health is expected to hold a board meeting on Monday to discuss the offers, final bids are likely to come by Sep 6.

Acquiring Signify Health will likely enable UNH to enhance care while reducing costs. UnitedHealth has a strong inorganic growth strategy in place. This year, it acquired Refresh Mental Health. Its Optum unit also agreed to merge with the in-home health services provider, LHC Group, for a total deal value of $5.4 billion. UnitedHealth is one of the few companies in the health care space with an expanding overseas business.

Signify Health’s offerings include at-home health evaluations, which can boost UNH’s product portfolio and capabilities. SGFY, with more than $8 billion market cap, has health insurers, government, private employers and others as clients, which will help UNH in membership growth and new contract wins. A deal might also favor UnitedHealth in reducing its operating cost ratio. However, its proposed acquisition of Change Healthcare is facing strong resistance from the watchdogs. The competition to acquire Signify Health is also fierce.

UNH’s competitor in this race, Amazon, is a huge name in the merger and acquisition space and it is expected to expand its footprint in the health care market. It already has Amazon Care, PillPack acquisition, Ginger partnership and others in its belt. On Jul 21, Amazon entered into a definitive agreement to acquire One Medical for $18 per share in an all-cash transaction, valued at approximately $3.9 billion.

Price Performance & Zacks Rank

UnitedHealth shares have rallied 28% in the past year compared with the industry’s 28.1% rise. It currently has a Zacks Rank #3 (Hold).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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