In the July 2005 issue:
UnitedHealth Group Offers $9.2 Billion to
Buy PacifiCare
Size does seem to matter, as UnitedHealth crafts a $9.2 billion deal to
buy PacifiCare and become the country’s largest MCO.
...
Consolidation Spikes in the
Generic
Pharmaceuticals Market
Consolidation among generic pharma companies is increasing in response to
the opportunities created as brand-name drugs lose their exclusivity.
...
Second Quarter Results
A total of 211 mergers and acquisitions were announced in the second
quarter of 2005. $18.4 billion was committed to fund this M&A activity.
...
In The Departments
The Month in Deals
Service Sectors
Service Summaries
Additional Transactions
Transaction Updates
Technology Sectors
Technology Summaries
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Companies mentioned in this issue:
A
aaiPharma p13
ABN AMRO p10
Adventist Health System—Sunbelt p4
Aerojet Fine Chemicals p13
Aetna p4
AIG Global Investment Group p13
Alkermes p13
Allied Capital Corporation p7
Amedisys p4
American Pacific Corp. p13
Anthem p3
Apax Partners p13
B
Balanced Care Corp. p9
Banc of America Securities p13
Bank Degroof p10
Bausch and Lomb p13
Bay Area Mobile Apheresis Program p8
BayNorth Capital p9
Bedford Community Medical Center p7
BiosPacific p11
Blue Chip Venture Company p13
Bradley Memorial Hospital p7
Bristol-Myers Squibb p10
Brookdale Living Communities p8
C
Callidus Capital Finance, LLC p11
Catholic Healthcare Partners p7
CB Richard Ellis p8
Celtic Pharma p11
Cephalon p13
CIVCO Medical Instruments Co. p12
Cleveland Community Hospital p7
Clinical Data p11
Coleman Swenson Hoffman Booth p13
Community Health Systems p7
D
D&K Healthcare Resources p10
Danaher Corp. p12
Deutsche Bank AG p8
Docupharma p10
Dr. Reddy’s Laboratories p10
Dun & Bradstreet p10
E
Eon Labs p10
EPI Corp. p8
Essex Woodlands p13
Evergreen Health Care p4
excellRx p9
F
Fischer Imaging Corp. p13
Fortress Investment Group p8
Fortron Bio Science p11
G
Geisinger Health System p7
Geisinger Wyoming Valley Medical Center p7
Genaissance Pharmaceuticals p11
GenCorp p13
GMAC Financial Services p8
H
HCA p7
Health Net p4
Healthcare Ventures p13
HealthSouth p8
Heumann Pharma GmbH & Co. Generica KG p10
Hexel AG p10
HMS Healthcare p9
Hologix p13
Housecall Medical Resources p4
I
IMS Health p10
InKine Pharmaceutical p13
IPC-AL REIT p9
J
Jubilant Organosys Ltd. p11
K
Kremer Laser Eye p10
L
Leiner Health Products p11
LifePoint Hospitals p7
M
Matrix Laboratories p10
McKesson Corp. p10
Medcon p11
Medical Properties Trust p9
Medimop Medical p12
Medtronic p12
Mercy Hospital p7
Merrill Lynch Capital p9
Morgan Stanley p4
MPM Capital p13
N
NeighborCare p9
Northern California Rehabilitation Hospital p9
Novartis p10
O
Omnicare p9
On-Call Plus p4
Oxford Health Plans p3
P
PacifiCare Health Systems p1
Pelton & Crane p12
Perseus-Soros BioPharmaceutical Fund p13
Pfizer p1
Pharmaceutical Formulations p11
Prudential Real Estate Investors p8
R
Reliant Pharmaceutical p11
Renal Care Group p8
ResCare p4
Roper Industries p12
Royal Philips Electronics p11
RxCrossroads, LLC p9
S
Salix Pharmaceuticals p13
Sandoz p10
Shandong Chia Tai Freda p13
Sicor p10
Silver Point Fund p13
Sino Biopharmaceutical p13
Spear Dermatology Products p11
Spear Pharmaceuticals p11
St. Rose Hospital p8
Stada Arzneimittel p10
Stentor p11
Strides Arcolab, Ltd. p10
T
TBMM Healthcare p9
Techne Corp. p11
Teva Pharmaceuticals p10
TLC Vision p10
Torrent Pharmaceuticals p10
Transneuronix p12
Triax Holdings, LLC p11
Trinity Laboratories p11
Tyco International Ltd. p12
U
UBS p10
UBS Securities LLC p13
United Rehab, LLC p8
UnitedHealth Group p1
V
Valleylab p12
Via Christi Health System p8
Vibra Healthcare p9
Vicuron Pharmaceuticals p1
Vivant Medical p12
VNU, NA p10
W
Wellchoice p4
WellPoint p1
West Pharmaceutical Services p12
X
Xanodyne Pharmaceuticals p13
Xenova Group plc p11 |
The
Health Care M&A Monthly
UnitedHealth Group Offers $9.2 Billion to
Buy PacifiCare
To become the country’s
largest manager of Medicare plans and grow its West Coast business,
UnitedHealth Group (NYSE: UNH) is acquiring PacifiCare Health
Systems (NYSE: PHS). In consummating what is the second-largest
managed care deal ever nnounced, UnitedHealth will secure its position as
the largest managed care company in terms of annual revenue.
Based in Minnesota,
UnitedHealth Group is one of the nation’s largest health care insurers.
Through its various plans and programs, it serves approximately 55 million
individuals nationwide. On a trailing 12-month basis, UNH generated
revenue of $40 billion, EBITDA of $5 billion and net income of $2.8
billion.
UnitedHealth
has been an active acquirer, averaging more than two deals a year for the
past several years. A select acquisition history for both UNH and PHS
appears on page 4.
Recently, UNH
has been vying for the title of top health care insurer with WellPoint
(NYSE: WLP), which emerged last year from the $16.5 billion merger of
WellPoint and Anthem. UNH countered that deal with its own, the
$4.9 billion acquisition of Oxford Health Plans.
Based in
California, PacifiCare provides managed care services to 3.3 million HMO
enrollees and specialty services to 10.4 million members through PBM,
dental and vision plans, principally in the western United States. It is
also one of the biggest private providers of health plans to Medicare.
Apart from two deals last year, PHS made most of its acquisitions during
the 1990s. On a trailing 12-month basis, PHS generated revenue of $12.75
billion, EBITDA of $652 million and net income of $322 million.
Under terms
of the agreement, PHS shareholders will receive 1.1 shares of UNH stock
and $21.50 in cash for each share of PHS common stock they own. As a
result, UNH will pay out $2.2 billion in cash and issue approximately
111.6 million shares of stock currently worth $5.9 billion. By adding $1.1
billion in the assumption of PHS’ long-term debt, the net purchase price
rises to $9.2 billion. That price makes this the second-largest Managed
Care deal ever, after last year’s $16.5 billion Anthem-WellPoint deal and
ahead of the $8.9 billion Aetna-U.S. Healthcare deal nine years ago.
The
price-to-revenue (P/R) multiple in this deal is 0.72x and the price-to-EBITDA
multiple 14.1x. The raw price per member is $672. However, based on the
percentage of revenue that each segment contributes to PHS’ overall
revenue, the price per HMO enrollee works out to approximately $2,600
while the price per specialty plan enrollee is $58.
This deal
creates a company with 69 million total members and $53 billion in annual
revenue, compared with WellPoint’s $27.3 billion in annualized revenue and
27.7 million members. This transaction will confer on UNH all those
benefits that go along with being king of the hill.
The only
hurdle this deal might encounter is opposition from California’s Attorney
General Garamendi, who held the Anthem-WellPoint deal hostage until he
could extract some further concessions for the state. Even so, WLP’s
history of dealings with the AG’s office ought to provide UNH with a map
for navigating that legal minefield. Morgan Stanley served as an
advisor to PacifiCare.
News of this
deal has bred speculation about more consolidation and dealmaking in the
Managed Care sector, some of it admittedly little more than gossip. One
proposal has Aetna (NYSE: AET) buying Health Net (NYSE: HNT),
which has a presence in the Medicare Advantage market in AET’s home state
of Connecticut. Aetna, however, has denied such a move. Another idea
circulating in the press, and one easier to swallow, is that WellPoint
will eventually buy Wellchoice (NYSE: WC), the New York Blues plan
that recently went public. Given WellPoint’s penchant for buying Blue
Cross Blue Shield plans, this is more likely a case of when, rather than
if. |
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