Health insurer UnitedHealth Group said on Monday it would acquire Las Vegas-based Sierra Health Services for $43.50 per share, or about $2.6 billion, to help it expand in the fast-growing U.S. Southwest.
The deal will add about 310,000 employer-sponsored health plan members in Nevada to UnitedHealth's rolls as well as about 320,000 people from senior and government programs throughout the United States.
UnitedHealth is offering Sierra shareholders $43.50 per share in cash, a 21% premium over Sierra's closing price on Friday. The deal must be cleared by Sierra shareholders and regulators in Nevada, California and Texas.
But UnitedHealth expects the transaction to close by the end of the year.
United Health expects the transaction to add about 4 cents a share to earnings in the first 12 months following the closing. Analysts surveyed by Thomson Financial expect the company to earn $3.98 per share in 2008.
UnitedHealth said it will not include the additional earnings in its outlook until the transaction has closed.
Should the deal not close, Sierra will be obligated to pay a break-up fee of about $85 million under certain circumstances.
UnitedHealth will fund the transaction with cash on hand, cash flows from operations and normal capital market activities.
Separately, UnitedHealth reiterated its intention to buy back about $4 billion to $4.5 billion in stock in 2007 under an ongoing share repurchase program.