Keith Pagnani, 48, cohead of Sullivan & Cromwell‘s health care and life sciences practice.


UnitedHealth Group, the Minnetonka, Minnesota–based managed health care giant.


UnitedHealth said Monday it will pay $4.9 billion in cash for a 90 percent stake in Brazilian health care provider Amil Participações.


Under the terms of the agreement, UnitedHealth will first acquire 60 percent of Rio de Janeiro–based Amil from founder Edson Bueno and his partner, Dulce Pugliese, before the end of the year. Another 30 percent stake will be purchased from Amil’s public shareholders over the course of the first half of 2013. The deal calls for Bueno and Pugliese to retain the remaining 10 percent stake for at least five years after closing. Bueno has also agreed to buy about $470 million worth of UnitedHealth shares to be held for the same five-year period.

Regulatory approval of the transaction is expected before the end of the year and UnitedHealth also expects to reap roughly $600 million in Brazilian tax benefits as a result of the purchase.


The insurance industry has seen its share of consolidation this year. Domestic deals involving Medicare and Medicaid providers have been popping up as companies prepare for implementation of the Affordable Care Act. Two such deals—WellPoint’s $4.9 billion acquisition of Amerigroup and Aetna’s $5.7 billion purchase of Coventry—were announced in July and August, respectively.

UnitedHealth’s deal for Amil suggests that insurance companies could be looking overseas for deal targets, as well. Pagnani says the qualities that made Amil attractive to his client would likely appeal to other U.S. companies and he would not be surprised to see similar deals announced in the future. Brazil has a growing middle class, Pagnani notes, and a majority of the population has not yet purchased insurance. UnitedHealth’s deal announcement points out that the number of people with private health insurance in Brazil increased by 13 million—to a total of 48 million—from 2005 to 2011. Even so, only about 25 percent of the population is privately covered.

“There just was a population that was really not being serviced and now has sort of the disposable income and the wherewithal to seek out those services,” Pagnani says.


Pagnani’s relationship with UnitedHealth goes back to 2004 and started with him sitting on the opposite side of the table. That year, he advised Oxford Health Plans on its $4.9 billion sale to UnitedHealth, establishing a relationship with the buyer’s in-house team along the way. When they floated the idea of Pagnani doing work for UnitedHealth in the future, he jokes: “I wasn’t sure if they were just trying to curry favor with me during the negotiations or not. But sure enough, about six months later the phone rang.”

Pagnani led the way the following year when UnitedHealth paid $500 million for John Deere Health Care, and he says S&C has advised on “probably half-a-dozen” deals since then. Among those transactions was last year’s purchase of Medicare specialist XLHealth, which Bloomberg reported to be worth about $2 billion.


UnitedHealth has been looking to make a big splash overseas for some time and first reached out to S&C this past spring with an eye toward Amil, according to Pagnani.

At first, the process trudged along as UnitedHealth took its time getting familiar with the target and the local market and culture. “This was a lot different animal than a domestic purchase of a managed care organization, which they’re obviously very skilled at and familiar with,” Pagnani says.

Once negotiations began to heat up in late summer, the continued involvement of Amil’s majority owners, Bueno and Pugliese, became a key factor for UnitedHealth. In the end, that was addressed through Bueno and Pugliese’s retention of a combined 10 percent stake in the company. Bueno will also continue as Amil CEO and join UnitedHealth’s board of directors once the transaction closes.

Pagnani says that UnitedHealth felt the best way to assure the partnership’s success was to make sure that the interests of Amil management remain aligned with its own, which is why Bueno also agreed to buy a chunk of UnitedHealth shares with some of the money he’ll earn from the sale of his stake. “He’s taking his own money off the table and putting it into United, which is an acknowledgement that he’ll want to see United do well and succeed,” Pagnani says.