Our Take: Optum-Amedisys deal delayed after DOJ requests more information
Amedisys disclosed in a filing with the Securities and Exchange Commission on Aug. 10 that the Department of Justice has requested additional information pertaining to the company’s proposed $3.3 billion merger with UnitedHealth Group’s Optum.
Amedisys, a home health and hospice provider based in Baton Rouge, La., announced its intentions to combine with Optum in late June, terminating a definitive agreement Amedisys signed in early May to merge with Option Care Health.
Optum and Amedisys were required to observe a 30-day waiting period under the Hart-Scott-Rodino Antitrust Improvements Act before proceeding with their plans to merge. The clock began ticking after the companies filed the necessary notification and report form with the DOJ’s antitrust division on July 5. The DOJ issued its request for more information on Aug. 4.
Now, another 30-day waiting period will automatically kick in when the companies have “substantially complied” with the new request, although the DOJ could terminate the second waiting period sooner.
In related news, an Amedisys shareholder is suing the home health provider and its board of directors in an effort to enjoin the proposed acquisition. The lawsuit, filed on Aug. 14, alleges the defendants omitted or misrepresented material information regarding the proposed transaction in a proxy statement filed with the SEC on July 31.
While the lawsuit focuses primarily on allegations that Amedisys and its board members failed to disclose financial information investors needed to properly evaluate the company’s “true worth” and the accuracy of financial analyses, it also alludes to “certain conflicts of interest for management” with regard to the proposed acquisition.
The plaintiff is requesting a jury trial.
In its Aug. 10 SEC filing, Amedisys mentions a similar lawsuit brought by a different shareholder. That lawsuit was filed on Aug. 8. Amedisys said in the filing it believed the lawsuit had no merit and vowed to vigorously defend against it “and any subsequently filed similar actions.”
Our Take: The DOJ’s request for information was not unexpected, especially in light of the federal government’s more aggressive stance recently on preventing businesses from monopolizing their markets through mergers and acquisitions.
In this case, the request was even more likely because Optum just completed its $5.4 billion acquisition of another home health provider, LHC Group, in February. The DOJ may focus most of its scrutiny of the proposed Amedisys deal on how much overlap there is between markets served by LHC Group and those served by Amedisys.
According to Matt Larew, an analyst with investment banking firm William Blair, Amedisys and LHC Group combined represent less than a 10% share of the home health market and even less of the hospice market, Fierce Healthcare reported.
So, from that perspective, most analysts and experts who’ve weighed in on the matter don’t seem to anticipate enough of an issue to sink the Optum-Amedisys deal. If anything, Amedisys may have to divest some of its locations to allow the transaction to proceed.
However, the DOJ began a monopoly investigation into the managed care industry a few weeks ago, and that could have implications for Optum’s plans to acquire Amedisys. Such investigations generally take many months, though, if not years, so the odds that this one will interfere with Optum’s latest deal are slight, at best.
The way we see it, if the DOJ couldn’t prevent Optum’s $13 billion acquisition of Change Healthcare, it’s doubtful the DOJ would be able to preempt the Amedisys transaction, even if it were to try — and at this juncture, that’s unlikely.
Health systems across America have grappled with financial difficulties, staffing challenges, and high rates of employee burnout in the aftermath of the COVID-19 pandemic. Today, we sit down with Laurie Smith, former Billings Clinic chief nursing officer and founder of Laurie Lee Leadership, who talks about the importance of executive leadership development in overcoming these persistent industry obstacles. Listen here or wherever you get your podcasts.
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