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UnitedHealth plans overseas growth with $4.9B deal

UnitedHealth Group Inc. will spend about $4.9 billion to buy a majority stake in a Brazilian health benefits and care provider, as the largest U.S. health insurer leaps into an international market it says is primed for growth.

UnitedHealth, based in Minnetonka, Minn., said Monday that it will pay cash for about 90 percent of the outstanding shares of Amil Participacoes SA. The Brazilian company provides health and dental benefits and runs a care delivery network that includes 22 hospitals, about 50 clinics. It serves more than 5 million people.

UnitedHealth currently operates in 70 countries, and its services include expatriate coverage for people living outside their home countries. But company spokesman Don Nathan said it had only a “very small” presence in Brazil before this deal.

The insurer’s international operations also represent a relatively minor slice of UnitedHealth’s total business, which is largely focused in the United States. UnitedHealth revenue totaled $101.9 billion last year. Nathan declined to say how much of that came from international markets.

UnitedHealth and competitors like Cigna Corp. have pushed to increase their international operations in recent years, as enrollment growth in the U.S. market slowed while the economy stalled. U.S. pharmaceutical companies also have labeled countries like Brazil as sources for future revenue growth as they face patent expirations for key products in their home markets.

UnitedHealth said about 78 percent of the U.S. market is covered by private health insurance. In contrast, only 25 percent of Brazil’s population of 200 million people has such coverage, and only 9 percent of the market has dental benefits, statistics that leave room for growth.

UnitedHealth also said Brazil, which has the world’s sixth largest economy, is promoting private sector care to relieve pressure on its publicly funded system.

“Its growing economy, emerging middle class and progressive policies toward managed care make it a high potential growth market,” UnitedHealth CEO Stephen J. Hemsley said in a statement from the insurer.

Amil Participacoes, which is publicly traded in Brazil, earned $88 million on $4.45 billion in revenue last year.

UnitedHealth said it will buy about 60 percent of the Brazilian company’s outstanding shares from controlling shareholders and management after receiving approval from Brazilian regulators, which it expects in the fourth quarter. It will then buy about 30 percent of the shares from public stockholders in the first half of 2013.

The purchase price drops to $4.3 billion when counting Brazilian tax benefits.

Amil’s founder, Dr. Edson Bueno, and his partner, Dr. Dulce Pugliese, will retain the remaining 10 percent of the company’s stock for at least five years. UnitedHealth then has an option to buy that remaining stake.

Bueno said in a statement the deal “will enable us to bring advanced technology, a tradition of practical innovation, service initiatives and clinical programs to further strengthen health care in Brazil.”

UnitedHealth also said Monday it expects third-quarter earnings to be at least $1.45 per share. That trumps analysts’ expectations for earnings of $1.25 per share, according to a FactSet survey.

The insurer, which routinely tops Wall Street’s quarterly expectations, will release the rest of its results Oct. 16.

UnitedHealth shares climbed 59 cents to $57.72 in premarket trading Monday. Its shares have slipped since hitting a 52-week high of $60.75 on June 19. They traded as low as $42.86 last October.



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