UnitedHealth Group Signs Definitive Agreement to Acquire Sierra Health Services, Inc.
March 12 2007 - 7:30AM
Business Wire
UnitedHealth Group (NYSE:UNH) and Sierra Health Services, Inc.
(NYSE:SIE) (Sierra) today announced that they have signed a
definitive merger agreement under which UnitedHealth Group will
acquire all of the outstanding shares of Sierra, a diversified
health care services company based in Las Vegas, for $43.50 per
share in cash, representing a total equity value of $2.6 billion.
The transaction, which has been approved by the Boards of Directors
of both companies and is expected to close by the end of 2007 or
sooner, is subject to state and federal regulatory approvals,
including in Nevada, California and Texas, approval by Sierra�s
stockholders, and other customary conditions. �We have completed
extensive due diligence, and expect Sierra�s positive performance
to continue,� said Mike Mikan, chief financial officer of
UnitedHealth Group. �Sierra is a financially strong organization
with very stable operations and systems, and has a long and
well-recognized history of consistently and profitably delivering
high-quality, affordable health care in Nevada.� Sierra is a
leading provider of health benefits and services, serving
approximately 310,000 employer-sponsored health plan members in
Nevada and 320,000 people in senior and government programs
throughout the United States. The combined business in the Nevada
region will continue under the leadership of Sierra�s chairman and
chief executive officer Anthony M. Marlon, M.D. and his management
team. The transaction combines Sierra�s broad local networks of
high-quality health care providers and services with UnitedHealth
Group�s organized system of care providers and clinical centers of
excellence programs throughout the United States, its significant
capabilities and technologies to support consumers, and its
leadership role in making the health care system work better for
all constituents. UnitedHealth Group president and chief executive
officer Stephen J. Hemsley said, �Combining UnitedHealthcare and
Sierra brings together two strong and innovative companies that
each have a heritage of providing consumers access to affordable,
quality medical care. The combined enterprise will have the scale,
resources and commitment to offer the most comprehensive range of
affordable services to our clients in the Southwest, as well as for
clients with business interests across the country. �Sierra�s
clinical operations are led by the physicians of its affiliate,
Southwest Medical Associates, which is Nevada�s largest
multi-specialty medical group practice,� Hemsley continued. �They
have long provided strong leadership around the delivery of quality
care. We see significant opportunities to learn from them and to
leverage their expertise in combination with our leading data
assets to gain clinical insights that will be useful in a wide
variety of broader care delivery settings in our network-based care
model.� Dr. Marlon, the founder of Sierra, said, �United�s national
scope, reputation for affordable, quality product design and
overall credibility with decision-makers assure me that the best
interests of our customers, providers and employees will be
considered. The key to Sierra�s success over the past 25 years has
always been our exceptional people and their promise to provide
consumers with quality health care. These attributes have
contributed to Sierra�s positive reputation in Nevada and to the
value the Company has created for its shareholders. This merger is
the next step in continuing that promise, and we are confident that
this combination will generate significant benefits for all of our
stakeholders as we work to improve the delivery of care across the
health care system.� UnitedHealth Group sees this business
combination creating opportunities in a number of areas: The full
spectrum of health benefit programs and services for commercial and
governmental employers � ranging from large multisite corporations
to small local businesses � as well as for individuals; The most
extensive portfolio of services to address the needs of
participants in government-sponsored programs, including older
Americans in a variety of Medicare programs and Nevada state
Medicaid beneficiaries; Diversified services dedicated to
specialized health care needs such as behavioral, dental, vision
and pharmaceutical benefits. The addition of Sierra further
complements UnitedHealth Group�s businesses in the high-growth
Southwest region. The U.S. Census Bureau estimates that Nevada was
the second fastest-growing state in 2006 � after ranking number one
for population growth percentage in each of the 19 previous years.
UnitedHealth Group already has solid market positions in the
adjacent growth states of Arizona, California, Colorado and Utah.
David Wichmann, president of UnitedHealth Group�s individual and
employer markets business group, which includes its
UnitedHealthcare business, said, �The assets, brands and
reputations of Sierra and Southwest Medical Associates will
significantly strengthen our growth platform in the region. Sierra
is widely recognized as the best-in-class local health benefits
provider in Nevada. We have immense respect for Dr. Marlon and his
management team and the 3,000 dedicated employees of Sierra, and we
look forward to welcoming them into the UnitedHealth Group family.�
Under the agreement a wholly owned subsidiary of UnitedHealthcare,
a UnitedHealth Group company, will merge with Sierra. The merger
agreement requires Sierra to pay UnitedHealth Group a termination
fee of approximately $85 million in the event the merger is not
consummated for certain specified reasons, such as Sierra�s Board
of Directors changing its recommendation of the merger.
UnitedHealth Group anticipates the acquisition will be immediately
accretive to earnings per share upon closing, adding earnings of
approximately $0.04 per share in the first 12 months without
consideration of any potential synergies. UnitedHealth Group will
not include these earnings gains in its financial outlook until the
transaction has closed. UnitedHealth Group also expects the
combined company to realize operating enhancements that will
provide additional value for all constituents, including
shareholders. Financial synergies are expected to contribute up to
$30 million in additional operating earnings to combined company
results in calendar 2008, with additional gains to follow in
subsequent years. The transaction will be financed by UnitedHealth
Group with cash on hand, cash flows from operations and normal
capital market activities. Separately, UnitedHealth Group
reiterated that it plans to buy back approximately $4.0 billion to
$4.5 billion in stock in 2007 under its ongoing share repurchase
program. Sierra Health Services and UnitedHealth Group were served
on this agreement by financial advisors Lehman Brothers and J.P.
Morgan, respectively. About UnitedHealth Group UnitedHealth Group
(www.unitedhealthgroup.com) is a diversified health and well-being
company dedicated to making health care work better. Headquartered
in Minneapolis, Minn., UnitedHealth Group offers a broad spectrum
of products and services through six operating businesses:
UnitedHealthcare, Ovations, AmeriChoice, Uniprise, Specialized Care
Services and Ingenix. Through its family of businesses,
UnitedHealth Group serves approximately 70 million individuals
nationwide. About Sierra Health Services, Inc. Sierra Health
Services, Inc. based in Las Vegas, is a diversified health care
services company that operates health maintenance organizations,
indemnity insurers, preferred provider organizations, prescription
drug plans and multi-specialty medical groups. Sierra�s
subsidiaries serve more than 850,000 people through health benefit
plans for employers, government programs and individuals. For more
information, visit Sierra�s Web site at www.sierrahealth.com.
Important Merger Information In connection with the proposed
transactions, UnitedHealth Group and Sierra intend to file relevant
materials with the Securities and Exchange Commission (SEC),
including, in the case of Sierra, a proxy statement and other proxy
solicitation materials. Because those documents will contain
important information, holders of Sierra common stock are urged to
read them, if and when they become available. When filed with the
SEC, they will be available for free (along with any other
documents and reports filed by UnitedHealth Group and Sierra with
the SEC) at the SEC�s Web site, www.sec.gov, and Sierra
stockholders will receive information at an appropriate time on how
to obtain transaction-related documents for free from Sierra. Such
documents are not currently available. UnitedHealth Group and its
directors and executive officers may be deemed to be participants
in the solicitation of proxies from the holders of Sierra common
stock in connection with the proposed transactions. Information
about the directors and executive officers of UnitedHealth Group is
set forth in the proxy statement for UnitedHealth Group�s 2006
Annual Meeting of Stockholders, which was filed with the SEC on
April 26, 2006. Investors may obtain additional information
regarding the interest of such participants by reading the
prospectus and proxy solicitation statement if and when it becomes
available. Sierra and its directors and executive officers may be
deemed to be participants in the solicitation of proxies from the
holders of Sierra common stock in connection with the proposed
transaction. Information about the directors and executive officers
of Sierra and their ownership of Sierra common stock is set forth
in the proxy statement for Sierra�s 2006 Annual Meeting of
Stockholders, which was filed with the SEC on April 13, 2006.
Investors may obtain additional information regarding the interests
of such participants by reading the proxy statement and other proxy
solicitation materials when they become available. This
communication shall not constitute an offer to sell or the
solicitation of an offer to buy any securities, nor shall there be
any sale of securities in any jurisdiction in which such offer,
solicitation or sale would be unlawful prior to registration or
qualification under the securities laws of any such jurisdiction.
No offering of securities shall be made except by means of a
prospectus meeting the requirements of Section 10 of the Securities
Act of 1933, as amended. Forward-Looking Statements This news
release may contain statements, estimates, projections, guidance or
outlook that constitute �forward-looking� statements as defined
under U.S. federal securities laws. Generally the words �believe,�
�expect,� �intend,� �estimate,� �anticipate,� �plan,� �project,�
�will� and similar expressions, identify forward-looking
statements, which generally are not historical in nature. These
statements may contain information about financial prospects,
economic conditions, trends and unknown certainties. We caution
that actual results could differ materially from those that
management expects, depending on the outcome of certain factors.
These forward-looking statements involve risks and uncertainties
that may cause UnitedHealth Group�s actual results to differ
materially from the results discussed in the forward-looking
statements. Some factors that could cause results to differ
materially from the forward-looking statements include: the
potential consequences of the findings announced on October 15,
2006 of the investigation by an Independent Committee of directors
of our historic stock option practices, the consequences of the
restatement of our previous financial statements, related
governmental reviews, including a formal investigation by the SEC,
and review by the IRS, U.S. Congressional committees, U.S. Attorney
for the Southern District of New York and Minnesota Attorney
General, a related review by the Special Litigation Committee of
the Company, and related shareholder derivative actions,
shareholder demands and purported securities and Employee
Retirement Income Security Act (ERISA) class actions, the
resolution of matters currently subject to an injunction issued by
the United States District Court for the District of Minnesota, a
purported notice of acceleration with respect to certain of the
Company�s debt securities based upon an alleged event of default
under the indenture governing such securities, and recent
management and director changes, and the potential impact of each
of these matters on our business, credit ratings and debt;
increases in health care costs that are higher than we anticipated
in establishing our premium rates, including increased consumption
of or costs of medical services; heightened competition as a result
of new entrants into our market, and consolidation of health care
companies and suppliers; events that may negatively affect our
contract with AARP; uncertainties regarding changes in Medicare,
including coordination of information systems and accuracy of
certain assumptions; funding risks with respect to revenues
received from Medicare and Medicaid programs; increases in costs
and other liabilities associated with increased litigation,
legislative activity and government regulation and review of our
industry; our ability to execute contracts on competitive terms
with physicians, hospitals and other service providers; regulatory
and other risks associated with the pharmacy benefits management
industry; failure to maintain effective and efficient information
systems, which could result in the loss of existing customers,
difficulties in attracting new customers, difficulties in
determining medical costs estimates and appropriate pricing,
customer and physician and health care provider disputes,
regulatory violations, increases in operating costs, or other
adverse consequences; possible impairment of the value of our
intangible assets if future results do not adequately support
goodwill and intangible assets recorded for businesses that we
acquire; potential noncompliance by our business associates with
patient privacy data; misappropriation of our proprietary
technology; and anticipated benefits of acquisitions that may not
be realized. This list of important factors is not intended to be
exhaustive. A further list and description of some of these risks
and uncertainties can be found in both companies� reports filed
with the Securities and Exchange Commission from time to time,
including annual reports on Form 10-K, quarterly reports on Form
10-Q and current reports on Form 8-K. Any or all forward-looking
statements we make may turn out to be wrong. You should not place
undue reliance on forward-looking statements, which speak only as
of the date they are made. Except to the extent otherwise required
by federal securities laws, we do not undertake to publicly update
or revise any forward-looking statements.
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