DOJ’s In-Depth Review Delays UnitedHealth’s $3.3 Billion Amedisys Acquisition

The Department of Justice (DOJ) is intensifying its scrutiny of UnitedHealth Group’s bid of $3.3 billion for Amedisys’ acquisition, prompting a delay in the deal’s timeline. UnitedHealth Group, through its Optum unit, had revealed its intentions in late June to acquire the home health and hospice company, surpassing a rival bid from Option Care Health.

DOJ Review of Amedisys Acquisition:

• DOJ scrutiny delays UnitedHealth’s $3.3 billion acquisition of Amedisys.
• Amedisys receives a second information request from DOJ, prolonging the deal’s waiting period.
• Regulatory oversight on mergers increases with updated guidelines and President Biden’s executive order.
• Analysts expect acquisition to proceed, reflecting heightened industry consolidation trends.

The proposed Amedisys acquisition involves UnitedHealth’s Optum unit purchasing Amedisys in an all-cash transaction at a rate of $101 per share, resulting in a deal valuation estimated at $3.3 billion as indicated in media reports.

Amedisys disclosed in a filing with the U.S. Securities and Exchange Commission that it received a second request from the DOJ for information under the Hart-Scott-Rodino Antitrust Improvements Act. Both Amedisys and UnitedHealth Group submitted the mandatory pre-merger notification forms to the Federal Trade Commission and the DOJ’s antitrust division on July 5. The DOJ’s second information request was received by Amedisys on August 4.

This additional request extends the waiting period before UnitedHealth and Amedisys can finalize the deal. The companies are required to wait for 30 days after they have substantially complied with the second request, unless either party agrees to an extension or the U.S. Department of Justice decides to terminate the period sooner.

In line with the heightened regulatory attention on mergers and acquisitions to curb anticompetitive strategies, federal regulators have signaled their intent to increase oversight in this arena. The Federal Trade Commission (FTC) and the DOJ have proposed updated merger guidelines to more effectively monitor the rise in merger submissions and the concentration of multiple industries.

President Joe Biden’s executive order in the summer of 2021 called for intensified scrutiny of merger transactions, specifically addressing the pervasive consolidation in the healthcare sector. Consequently, regulators have shown a willingness to challenge major healthcare and pharmaceutical deals they perceive as anticompetitive, although not all of these efforts have been successful in court.

The healthcare sector has seen a surge in investment, with CVS making a significant acquisition of Signify Health this year. Optum, a division of UnitedHealth Group, is actively seeking home health assets. The company recently concluded a $5.4 billion purchase of home health provider LHC Group.

Amedisys, headquartered in Baton Rouge, Louisiana, offers home health, hospice, and palliative care services, operating across 37 states and the District of Columbia with around 18,000 employees and 522 care centers. The company ventured into the hospital-at-home market in 2021 with its acquisition of Contessa Health for $250 million.

Analysts predicted that the UnitedHealth-Amedisys deal would face regulatory scrutiny, yet they also noted that Optum’s experience with the FTC during the LHC Group acquisition could provide confidence in the successful closure of this deal. Despite this, there isn’t a dominant player in the home health market, and even if LHC Group and Amedisys were combined, they would hold less than 10% of the market share and a smaller portion of the hospice market.

While the second request for information suggests regulatory scrutiny, it doesn’t necessarily imply that the acquisition won’t ultimately proceed. Recent healthcare deals, including Amazon’s acquisition of One Medical for $3.9 billion and CVS’ $8 billion bid for Signify Health, faced delays due to additional information requests from regulators, but all three transactions were eventually completed after review by the FTC.