Can UnitedHealth Group Inc. stop after swallowing just one more regional managed care company?
Analysts at Moody’s Investors Service are asking that question in the wake of UnitedHealth’s announcement that it has agreed to pay $2.6 billion in cash for Sierra Health Services Inc., Las Vegas.
Mike Mikan, chief financial officer at UnitedHealth, Minnetonka, Minn., says UnitedHealth has reviewed Sierra carefully.
“Sierra is a financially strong organization with very stable operations and systems,” Mikan says.
UnitedHealth and Sierra hope to complete the proposed deal by Dec. 31.
The boards of both companies have given their blessing, but the companies still need approval from Sierra’s stockholders and from state regulators in California, Nevada and Texas.
The deal is getting good reviews from credit analysts at Moody’s, at Standard & Poor’s Ratings Services, New York, and in the Chicago office of Fitch Ratings.
The deal will give Sierra the backing of a larger, stronger, more diversified company, Fitch says in a comment.
Although UnitedHealth has strong operations in the states around Nevada, Sierra “has a superior market position in the Las Vegas region, a region where [UnitedHealth's] existing presence is considered weak,” Fitch says.
Moody’s cites similar strengths in its own comment about the deal and adds that the deal should help UnitedHealth increase sales to national employers with operations in the Las Vegas area.
But Moody’s notes that UnitedHealth still is absorbing PacifiCare Health Systems Inc., Cypress, Calif., a large managed care company acquired in late 2005.
“Sierra is a much smaller health plan and the integration process should be less complicated,” Moody’s says.
But Moody’s “also recognizes the possibility that UnitedHealth may pursue similar transactions to improve market positioning in other local regions,” the rating agency says.