Credit Suisse’s https://www.credit-suisse.com update on the United Healthcare UNH/Change Healthcare (CHNG) merger as reported via Reuters, the U.S. District Judge Carl J. Nichols, the Judge presiding over DOJ’s lawsuit to block UNH’s acquisition of CHNG, has set August 1 as the trial start date.
The trial is going to last 12 consecutive business days (DOJ will have 7 days to present their case and UNH/CHNG will have 5 days). UNH/CHNG had requested that the trial start earlier (June 20, specifically), citing several months that the DOJ took to investigate.
UNH/CHNG also argued in court filings that the sooner they wrap up the acquisition, the sooner they can “unleash” its cost savings for the industry. On the flip side, the DOJ had suggested August 24, arguing that the end of August was the earliest they could be properly ready. With the trial expected to conclude on August 16, Credit Suisse analysts expect a ruling in likely in Sept/Oct.
With UNH now set to litigate, the UNH/CHNG merger agreement, which is currently set to expire April 5th, is likely to be extended in the coming weeks. As the analysts have noted previously, they expect CHNG to push for some incentive to stay on the deal and protection against the deal uncertainty. Analysts also see a merger termination fee (which has not been part of the current agreement) as a more likely scenario than an increase in purchase price.
UNH/Optum filed a public statement citing the benefits of the UNH/CHNG combination, the flaws to DOJ’s case, and their commitments to the merger deal. Against DOJ’s vertical data misuse concerns, Optum argued that their business model and financial success is dependent on providing products and services to external customers and not just UNH, essentially implying any misuse of customer CSI (competitively sensitive information) would be “economic suicide” for the company.
Against DOJ’s horizonal merger concerns, Optum noted that final bids are being received for the divestiture of CHNG’s ClaimsXten business and the company expects a signed agreement in place within a matter of weeks.
Optum also noted that they have agreed to make commitments to both Optum’s and CHNG’s customers and the government around data, firewalls, performance guarantees, and non-discrimination related to innovations to fully address the concerns.
Go to https://www.unitedhealthgroup.com/content/dam/UNG/PDF/2022/overview-optum-response.pdf for the public statement filed by UNH/Optum.
For prior notes, ask questions, provide feedback, or news, email Jailendra Singh at jailendra.singh@credit-suisse.com or call +1 585 260 0962.