UnitedHealth completes Sierra Health acquisition

THE ACQUISITION of Sierra by UnitedHealth Group will be complete as of the close of business today, the two health insurers said in their joint announcement. /
THE ACQUISITION of Sierra by UnitedHealth Group will be complete as of the close of business today, the two health insurers said in their joint announcement. /

MINNEAPOLIS and LAS VEGAS – UnitedHealth Group (NYSE:UNH) will complete its acquisition of Sierra Health Services Inc. (NYSE: SIE) by the close of business today, the companies said in a joint announcement. Under the merger agreement announced March 12, UnitedHealth will pay $43.50 for each share of Sierra common stock, giving the deal a total value of about $2.6 billion.
“We look forward to building on our shared heritage of providing consumers access to affordable, high-quality health care,” said Ken Burdick, CEO of the UnitedHealth Group’s UnitedHealthcare division, said in a statement today. “Our goal is to offer Nevadans the most comprehensive range of cost-effective, innovative health care products and services in the Southwest.”
The Las Vegas-based Sierra and its subsidiaries – including health maintenance organizations (HMOs), preferred-provider organizations (PPOs), indeminity insurers, prescription drug plans and a multi-specialty medical group – serve more than 860,000 people across Nevada, through health plans for employers, government programs and individuals.
The U.S. Department of Justice cleared the way for today’s closing by granting its approval for the transaction, which Nevada’s state Division of Insurance had approved on Aug. 27 (READ MORE), the companies said.
The Justice approval was conditioned upon UnitedHealth’s agreeing to divest itself of its individual SecureHorizons Medicare Advantage HMO plans in Clark and Nye Counties, where the plans have about 25,000 members. The insurer said it “has reached an agreement to transition these members to Humana Inc., subject to customary closing conditions.” The affected members will continue to receive the same benefits under their new insurer, and will experience no gaps in coverage, UnitedHealth said.
(Humana (NYSE: HUM) is expected to finance the $185 million transaction with finance it with a combination of cash and debt, credit-rating organization A.M. Best Co. said in affirming its rating for the Louisville, Ky.-based insurer, which now serves 1.1 million Medicare Advantage members nationwide.)
The divestiture will not affect SecureHorizons members who obtain their coverage as retirees, through commercial customers, UnitedHealth said. The company will continue to offer Senior Dimension-brand Medicare Advantage HMO plans in Nevada.
In a related agreement with Nev. Attorney General Catherine Cortez Masto, which the insurance companies described as “consistent with UnitedHealth Group’s longstanding commitment of philanthropic initiatives to improve and expand health care access for underserved populations,” UnitedHealth agreed to make $15 million in charitable contributions over the next five years, to benefit health care programs and consumers in Nevada.
“Joining our two organizations will be good for Nevada’s health care consumers, good for the many dedicated professionals who provide their care and good for the employees of Sierra,” Jonathon Bunker, president and chief operating officer of Sierra, said in a statement today. “With greater resources and advanced technology, we can now build upon our legacy by providing more options for our members and expanded access to the largest national network of hospitals, physicians and other care providers.”
Reacting to the merger’s completion, Fitch Ratings today upgraded Sierra Health Services’ insurer default rating (IDR) to “A” from “BBB” and its senior debt to “A-” from “BBB-,” assigning a rating outlook of stable. At the same time, however, Fitch also downgraded its insurer financial strength rating for the Sierra Health and Life Insurance Co. Inc. to “AA-” from the previous “A-.”
“UNH is a national leader in the U.S. health insurance and managed care sector, offering a variety of health and wellness products and services,” the ratings company added. “The company’s strong franchise is supported by well-established competitive positions across customer segments and in a number of major markets. Fitch sees the acquisition of SIE as significantly strengthening UNH’s competitive position in Nevada.”
The acquisition will not affect UnitedHealth Group’s full-year 2008 financial outlook, which already included projected results for Sierra, UnitedHealth said. The insurer continues to project full-year revenue of about $83 billion and earnings of about $3.95 to $4 per share.
Additional information, including Fitch Ratings’ scores for Rhode Island and other state bonds, is available at www.fitchratings.com.
UnitedHealth Group (NYSE:UNH) is a diversified health and well-being company based in Minneapolis, Minn. It offers a broad spectrum of products and services through six operating businesses – UnitedHealthcare, Ovations, AmeriChoice, Uniprise, Specialized Care Services and Ingenix – serving about 70 million individuals nationwide. Additional information is available at www.unitedhealthgroup.com.
For more information about Las Vegas-based Sierra Health Services Inc., which serves more than 860,000 people through employer, government and individual plans, visit www.sierrahealth.com.

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