UnitedHealth Group to buy PE backed Surgical Care Affiliates for $2.3bn

March 2017  |  DEALFRONT  | PRIVATE EQUITY & VENTURE CAPITAL

Financier Worldwide Magazine

March 2017 Issue

March 2017 Issue


Diversified health insurance firm UnitedHealth Group has announced that it is to acquire outpatient surgery chain Surgical Care Affiliates (SCA) for around $2.3bn. The deal will see SCA’s private equity backer, TPG Capital, which owns a 30 percent stake in the company, sell its holding as part of the deal. UnitedHealth, the largest health insurer in the US, will pay SCA shareholders $57 per share. This price represents a premium of 17 percent over SCA’s closing price on Friday 6 January. According to a statement announcing the deal, UnitedHealth will fund the deal via cash and stock.

The deal could prove to be an important step for UnitedHealth as the company continues to move away from its traditional offering as an insurance firm, transforming into a diversified health services company. Once the deal has been completed, UnitedHealth will combine SCA with OptumCare, a health services company and part of UnitedHealth Group. Adding SCA to its portfolio will see OptumCare’s revenue boosted by around $1.5bn and make the division one of the largest operators of surgery centres in the US.

Larry C. Renfro, vice chairman of UnitedHealth Group and Optum chief executive, said: “Combining SCA and OptumCare will enable us to continue the transition to high-quality, high-value ambulatory surgical care, partnering with the full range of health systems, medical groups and health plans. We have an incredibly high regard for SCA’s leadership and people, so we look forward to working with them and our payer partners to implement care models that reward independent surgeons and specialists for quality and care efficiency.”

SCA, based in Deerfield, Illinois, operates 205 surgical facilities, including specialised hospitals, in partnership with surgeons across 30 states. The company serves around one million patients per year. “Joining with OptumCare will enable us to better support and empower independent physicians, helping them provide high-quality care for their patients while making health care more affordable. The combination of SCA and OptumCare is another step forward toward our vision of becoming the partner of choice for surgeons,” said Andrew Hayek, chairman and chief executive of SCA. “We already have a strong relationship with OptumCare, so we have seen firsthand that our cultures and strategies are aligned and complementary.”

TPG Capital acquired its holding in HealthSouth Corporation’s surgery division in June 2007 and created SCA. “Over the past eight years, we have had the great pleasure of partnering with SCA as the business has transformed into a leader in the health care services sector,” said Lead independent director of SCA and managing partner of TPG Capital, Todd B. Sisitsky. “We believe this combination will create significant value for SCA’s patients and physician partners, and we look forward to the combined company’s future success.” Affiliates of TPG Capital, owning approximately 30 percent of the common stock of SCA, have agreed to tender their shares as part of the offer.

The transaction is expected to close during the first half of 2017, pending the endorsement of SCA’s shareholders, regulatory approvals and other customary closing condition. SCA’s larger shareholders – those holding over 30 percent of the company’s stock – have already indicated that they will support the transaction.

According to UnitedHealth, the deal is expected to be neutral to the company’s forecast for 2017 adjusted net earnings and will modestly add to its 2018 earnings. The company has used acquisitions to bolster the OptumCare brand in the past. In 2015 it acquired MedExpress, which had 141 full-service neighbourhood medical centres across 11 states.

Prior to the announcement of the transaction, UnitedHealth was already the biggest health insurer in the US; the company benefits from a diversified business model, which also includes pharmacy-benefits management and consulting services.

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Richard Summerfield


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