UnitedHealth Group buys Sierra for $2.6B
MINNEAPOLIS – UnitedHealth Group, one of the nation’s largest managed care organizations, took a bold step last month to boost its footprint in the western U.S. by acquiring Sierra Health Services Inc. for an estimated $2.6 billion.
The two companies announced a definitive merger agreement on March 12. United said it would acquire all of the outstanding shares of Sierra, a diversified healthcare services company based in Las Vegas, for $43.50 per share in cash.
The deal has already been approved by both companies’ boards of directors. Federal approval and blessings from state governments in California, Nevada and Texas could take until the end of the year, the companies said.
The acquisition gives UnitedHealth a significant presence in Nevada, where Sierra has been growing the managed care business for more than 20 years. Sierra said it has 310,000 employee-sponsored health plan members and 320,000 in senior and government programs.
UnitedHealth noted that the U.S. Census Bureau estimates that Nevada was the second fastest-growing state in 2006 – after ranking No. 1 in terms of population growth percentage in each of the 19 previous years. The company said it already has solid market positions in the adjacent growth states of Arizona, California, Colorado and Utah.
“The assets, brands and reputations of Sierra and Southwest Medical Associates will significantly strengthen our growth platform in the region,” said David Wichmann, president of UnitedHealth Group’s individual and employer markets business group. “Sierra is widely recognized as the best-in-class local health benefits provider in Nevada.”
UnitedHealth said it would finance the transaction with cash, cash flow from operations and normal capital market activities. The acquisition will provide a boost to UnitedHealth’s 2007 earnings, the company said, estimating an earnings improvement of about 4 cents per share.
