U.S. insurance giant UnitedHealth Group said Monday it will pay $4.9 billion to acquire control of one of Brazil’s largest health care providers, Amil Participações, in an effort to expand into a market with a largely untapped customer base.
The transaction’s terms call for Minnetonka, Minnesota–based UnitedHealth to pay cash to acquire its 90 percent stake in Amil, while the Brazilian company’s current majority owners—founder Edson Bueno and his partner, Dulce Pugliese—will retain the remaining 10 percent stake for at least five years. Bueno has also agreed to buy roughly $470 million in UnitedHealth shares, which he will hold for the same five-year period. In its announcement of the deal, UnitedHealth added that it expects to reap an estimated $600 million in Brazilian tax benefits as a result of the acquisition.
UnitedHealth is to buy 60 percent of Amil’s shares before the end of the year, pending regulatory approval of the deal. The company will purchase the balance of the stake it is acquiring from Amil’s public shareholders during the first half of 2013.
UnitedHealth turned to longtime counsel Sullivan & Cromwell as its lead outside counsel on the deal. New York–based M&A partner Keith Pagnani is leading the S&C team, which also includes M&A partner Sergio Galvis, tax partner Ronald Creamer, litigation partner Theodore Edelman, compensation and benefits partner Matthew Friestedt, and securities partner William Farrar. S&C’s team worked with Brazilian firm Pinheiro Neto as local counsel.
Pagnani, who is cohead of S&C’s health care and life sciences practice, has advised UnitedHealth on a number of previous deals, including last year’s purchase of Medicare specialist XLHealth.
Rich Baer is UnitedHealth’s general counsel.
For its part, Amil is being advised by a legal team that includes the head of Linklaters‘s U.S. corporate practice, Alberto Luzarraga, as well as Carlos Barbosa Mello, a corporate lawyer with Linklaters’s Brazilian alliance firm, Lefosse Advogados.
In its deal announcement, UnitedHealth emphasized the Brazilian market’s growth potential. Demand for health insurance is on the rise in the country, with the number of people covered by private plans increasing by 13 million, to 48 million all told, from 2005 to 2011. That increase notwithstanding, only about one in four Brazilians currently has private health insurance, compared to nearly four out of every five people in the United States. Amil provides some five million people with health and dental benefits, as well as hospital and clinical services.
The insurance industry has seen an uptick in consolidation in 2012 in advance of the implementation of the Affordable Care Act. The sector’s major transactions so far this year include two deals involving Medicare and Medicaid providers—WellPoint’s $4.9 billion acquisition of Amerigroup and Aetna’s $5.7 billion deal for Coventry—that were announced within a month of each other earlier this summer.