UnitedHealth Group Inc. (UNH), the biggest U.S. health insurance company, is in talks to buy a stake or all of the Brazilian insurer and hospital operator Amil Participacoes SA (AMIL3), according to people familiar with the matter.
Acquiring all or part of Brazil’s biggest managed-care company, which carries a market value of 9.12 billion reais ($4.49 billion), would give Minnetonka, Minnesota-based UnitedHealth access to a growing private-insurance market in the world’s second-biggest emerging economy. It also may generate more opportunities for UnitedHealth’s Optum unit, which provides technology and consulting to health systems in India, China, the U.K. and elsewhere.
A deal may be announced as soon as next week, according to the people, who asked to remain anonymous because the talks are private. While Amil is also talking with other possible bidders, UnitedHealth has emerged as the likely buyer, the people said.
Brazil has “a sophisticated private-sector hospital system as well as a private insurance system that’s ripe for expansion,” said Sheryl Skolnick, a health-care analyst at CRT Capital Group LLC in Stamford, Connecticut.
Amil rose 1.2 percent at the close of trading in Sao Paulo, to 25.30 reais, the highest price on record. The stock has gained 55 percent in the past 12 months, amid speculation about a potential sale. UnitedHealth fell 1.5 percent to $57.13 in New York trading, for a gain of 29 percent in the past year.
Amil has hired Credit Suisse Group AG to sell a stake in its business, according to a second person familiar with the talks. The Pinheiro Neto Law firm is working on UnitedHealth’s side and Lefosse/Linklaters on the Amil side, one of the people said.
Amil “doesn’t comment on speculation,” the company said in an official e-mail statement. Tyler Mason, a UnitedHealth spokesman, said in a telephone call that the company doesn’t comment on rumors and speculation
UnitedHealth, which covers 35.9 million people on its medical plans, has completed 24 deals in the last five years, for an average disclosed size of $1.13 billion and an average premium of 12 percent, according to data compiled by Bloomberg. The largest was the March 2007 acquisition of Las Vegas-based insurer Sierra Health Services Inc. for $2.45 billion.
The Brazilian carrier covered 5.9 million people last year and owns 3,300 hospitals and 55,000 clinics, according to its website. Amil’s private insurance enrollment has grown 4.5 percent since 2009, compared with a 13.5 percent rise for the Brazilian market as a whole, according to an Aug. 31 research note from Guilherme Assis, a Raymond James analyst in Sao Paulo. Discounting acquisitions, its membership would have fallen 1 percent, he said.
Troubles with past acquisitions and increased competition have slowed growth and Brazilian antitrust regulators may resist Amil’s attempts to buy new hospitals, Assis said. The company had 9.01 billion reais in revenue last year, according to data compiled by Bloomberg.
“Amil’s strong focus on profitability is preventing it from fully tapping into the secular sector’s strong growth drivers,” Assis said.
UnitedHealth, which earned three-quarters of its revenue from managing benefits last year, is “going to the economies where there’s growth, where there’s a vibrant private sector and where there are significant health problems that need to be solved,” Skolnick said.
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