UnitedHealth Group (NYSE:UNH) announced Monday its plans to purchase a 90 percent stake in Amil Participacoes (AMPIF.PK), Brazil’s largest health insurer and hospital operator, for $4.9 billion. The remaining 10 percent stake will be held by Amil founder and Chief Executive Edson Bueno and partner Dulce Pugliese for at least five years.
As challenges mount for its U.S. business, the deal would allow UnitedHealth entry into a fast-growing private healthcare market and increase international business. The company has already begun operations in Australia, the Middle East, and the United Kingdom.
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The health insurer has not been alone in seeking acquisitions; Aetna (NYSE:AET) purchased rival Coventry Health Care (NYSE:CVH) for $5.6 billion and WellPoint (NYSE:WLP) has plans to buy Amerigroup (NYSE:AGP) for $4.5 billion.
“Combining Amil, the clear market leader serving an under-penetrated market of nearly 200 million people, with UnitedHealth Group’s experiences and capabilities developed over the last three decades is the most compelling growth and value creation opportunity we have seen in years,” said the President and Chief Executive Officer of UnitedHealth, Stephen J. Hemsley, in a statement.
As the government reins in reimbursement for its Medicaid and Medicare programs for the poor and the elderly and competition grows, U.S. health insurers have come under pressure.
The purchase of the stake in Amil gives UnitedHealth the opportunity to test a different model of medical service: Amil provides both insurance coverage and runs hospital and doctor facilities. While some services like this already exist in the United States, for the most part, the largest insurance companies operate separately.
UnitedHealth also said in the company’s statement that the deal is expected to increase its 2013 earnings per share and it expects third quarter net earnings of at least $1.45 per share. Analysts, according to Thomson Reuters I/B/E/S, were expecting $1.25 per share.
UnitedHealth shares are trading up over 1.5 percent this morning, topping $58 after closing at $57.13 on Friday.