Health care stocks joined forces Wednesday as UnitedHealth (UNH) announced it would acquire Change Healthcare (CHNG) and AmerisourceBergen (ABC) said it will buy Walgreens Boots Alliance‘s (WBA) drug-distribution business. The acquisitions come as Democrats are poised to take narrow control of the U.S. Senate, putting the future of health care stocks in doubt.
UnitedHealth plans to buy Change Healthcare for $7.84 billion, or 25.75 per share. That’s up from Change’s Tuesday closing price of 18.24. UnitedHealth sees the acquisition of the health IT firm as accretive to its adjusted earnings per share by 50 cents in 2022.
The companies plan to close in the second half of 2021, pending Change Healthcare shareholder approval.
UnitedHealth shares edged up 0.5% to 346.63 on the stock market today. The insurer is forming a flat base with a 368.05 entry point. Change Healthcare soared 32% to 24.02.
Health Care Stocks: AmerisourceBergen Deal Boosts Europe Operations
Drug wholesaler AmerisourceBergen said it would buy Walgreens’ drug distribution business for $6.5 billion as it looks to expand its coverage in Europe.
Under terms of the deal, AmerisourceBergen will pay Walgreens $6.27 billion in cash along with 2 million shares of common stock. Walgreens is the largest shareholder of AmerisourceBergen with a nearly 30% stake.
“The transaction will fuel higher future investments to grow and transform our core retail pharmacy and health care businesses, and is (earnings-per-share) accretive long-term for Walgreens Boots Alliance,” said Walgreens Chief Executive Stefano Pessina.
Walgreens plans to report quarterly earnings on Thursday. Analysts see the pharmacy’s earnings falling 25.5% to $1.02 a share but forecast a rise in revenue by 1.7% to $34.23 billion.
AmerisourceBergen shares jumped 7.7% to 105.25. The stock is forming a flat base with a 111.35 entry. Walgreens rose 3% to 42.40. Both health care stocks are part of the Dow Jones Industrial Average.
Dems Set To Take Control Of Senate
The Dow rose early Wednesday but the Nasdaq fell following the U.S. Senate runoff elections in Georgia. Democrat Raphael Warnock won his Senate runoff race against Republican incumbent Kelly Loeffler and Democrat Jon Ossoff leads Republican David Perdue.
If both Democrats win, the Senate evenly divides 50-50 between Democrats and Republicans. Vice President-elect Kamala Harris then becomes the deciding vote in the chamber. Wall Street analysts say a Democrat-controlled Senate likely results in higher corporate taxes and tougher regulations, but that Democrats plan to push for another round of stimulus for struggling businesses.
Even with the two victories, the Democrats’ lead in the Senate would too narrow for it to pass sweeping reforms in the health care sector. President-elect Joe Biden has discussed a public option that would expand the number of insured Americans and help boost the health insurance sector.
The effect of the Georgia U.S. Senate runoffs are unclear for health care stocks. The feeling is that managed care stocks like UnitedHealth may come under pressure but it is too soon to determine.
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