UnitedHealth Group and Change Healthcare will extend the closing date of their proposed $13 billion merger by another nine months, the companies said Tuesday.
Under the latest terms of the deal, UnitedHealth Group will pay a $650 million fee to Change Healthcare if the transaction is not completed because of a court decision. The U.S. Department of Justice last month sued to block the deal, alleging the merger would give UnitedHealth Group's $12 billion insurance arm access to proprietary information on what its competitor insurers pay providers, how they construct their networks and create a monopoly when it comes to claims clearinghouse technology, violating federal antitrust restrictions.
The DOJ lawsuit also alleged that, at the time the companies entered the agreement, UnitedHealthcare agreed to immediately increase its use of Change Healthcare's services, ensuring that if the transaction falls through, UnitedHealth will still pay Change about $60 million more per year than before the agreement was signed.
The two-week trial is scheduled to begin Aug. 1.
UnitedHealth Group has pledged to fight the DOJ suit, arguing that adding Change Healthcare's IT services to UnitedHealth's $12 billion Optum healthcare services arm will streamline clinical, administrative and payment processes for provider and payer customers, which would result in lower healthcare costs for patients.
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The companies have extended the deal's timeline previously. The merger plan was first announced in January 2021. UnitedHealth Group and Change Healthcare now aim to consummate the merger by Dec. 31.
"The extended agreement reflects our firm belief in the potential of our combination to improve healthcare, and in our commitment to contesting the meritless legal challenge of this merger," the companies said in a joint statement.
If the deal goes through, Change Healthcare pledged to pay a special cash dividend of $2 per share to its shareholders at the time of closing.
The IT company is reportedly in talks to sell its ClaimsXTen payment integrity service for more than $2 billion to private equity group New Mountain Capital to appease antitrust concerns.
Change Healthcare declined to comment about the potential sale.
UnitedHealth Group has also said it would be open to divestitures to get the regulatory green light, although offloading anything above $650 million in annual revenue would be unduly burdensome.
The uncertainty around the Change Healthcare deal has not slowed Optum's dealmaking.
Last week, UnitedHealth Group paid $5.4 billion to buy home health and hospice provider LHC Group.
UnitedHealth Group also paid an undisclosed sum to purchase Refresh Mental Health from private equity firm Kelso & Co last month. Jacksonville Beach, Florida-based Refresh runs a national network of more than 300 outpatient mental health, substance abuse and eating disorder centers. Kelso bought the company for nearly $700 million in December 2020.
"Together, we will be able to drive deeper integration between medical and behavioral healthcare and advance personalized care to patients through value-based care," a UnitedHealth Group spokesperson wrote in an email.
A few weeks ago, UnitedHealth Group also reportedly paid an undisclosed sum to buy Houston-based Kelsey-Seybold Clinic, an integrated, multispecialty care organization. The medical group was valued at $1.3 billion when private equity group TPG Capital made a minority investment in Kelsey-Seybold in January 2020.
Kelsey-Seybold and UnitedHealth Group declined to comment on the deal.
