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UnitedHealth Will Buy Surgical Care Affiliates For $2.35 Billion

From Diversified healthcare giant UnitedHealth Group Inc (NYSE:UNH) is acquiring outpatient surgery facilities operator Surgical Care Affiliates (SCAI) in a cash/stock combination deal.

The $57 per share acquisition will be completed by UNH’s Optum health services unit. That number is a 17% premium over SCAI’s Friday closing price of $48.75, and values the company at around $2.35 billion.

UnitedHealth noted that it will fund the move using somewhere between 51% and 80% of its common stock, with the remainder in cash. UNH won’t decide on a final cash/stock ratio until the deal nears completion.

The companies commented via press release:

“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.”

UNH anticipates the deal will close during the first half of 2017. The acquisition still requires approval from SCAI shareholders as well as governmental regulators. UnitedHealth expects the move to be modestly accretive to its 2018 earnings, but it won’t have any affect on 2017 numbers.

UnitedHealth Group Inc shares fell $0.92 (-0.57%) in premarket trading Monday. Year-to-date, UNH has gained 1.48%, versus a 1.65% rise in the benchmark S&P 500 index during the same period.

UNH currently has an POWR Rating of A (Strong Buy), and is ranked #1 of 7 stocks in the Medical – Health Insurance category.

ETF investors should keep an eye on the iShares Dow Jones US Health Care Providers Index Fund (NYSE:IHF) on today’s news. UNH currently makes up a whopping 15.62% of the fund’s total holdings, making IHF very sensitive to price changes in UnitedHealth’s stock price.

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