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UnitedHealth (New York Stock Exchange: UNH) planned to acquire Amedisys for $3.3 billion (NASDAQ:AMED) will likely close despite reports that the Justice Department is closely examining the combination, according to an RBC analyst.
The note comes after a report from the Capitol Forum on Wednesday that Department of Justice was considering a demand tor block its planned sale to UnitedHealth (UNH). The antitrust regulator has been removing the merging parties, while also engaging in divestment talks.
“We continue to believe the Optum/AMED deal will close given the strong precedent for carriers operating home health assets and the high fragmentation across the home care sector, even pro forma for the combination,” the RBC analyst said. Ben Hendrix, who has a top performance rating. at Amedisys he wrote in a note on Monday.
Investors are concerned about a potential lawsuit the Justice Department regulator filed in 2022 to block UnitedHealth's $8 billion purchase of Change Healthcare, a decision that a judge overturned, allowing the deal to go through. There is also concern after the WSJ reported late last month that the Justice Department is investigating ties between UnitedHealth and its health services division Optum.
According to Henrix, combining AMED with Optum's LHC group would create the largest home healthcare platform in the country with approximately 10% market share.
RBC's Hendrix said he believes there are comparatively fewer calls about anticompetitive concerns with AMED/UNH's vertical integration versus UNH's purchase of Change Healthcare. He also noted that the Justice Department's review of UNH's purchase of LHC Group took 254 days after the FTC's second request in June 2022, while the agreement with AMED is now 227 days later. of the second FTC request in August 2023.
RBC's Hendrix raised his price target for Amedisys (AMED) to $100 from $97 to reflect the $101 per share cash deal.
If AMED/UNH saw a deal breakup scenario, Hendrix would see a downside to Amedisys (AMED) stock at $74, reflecting a discount to peers and a slight discount to where it was trading before UNH announced the planned purchase.
