Anthem Inc

In the Rite Aid–Walgreens merger, Walgreens is paying about 0.6x trailing-12-month revenues and 13.6x trailing-12-month EBITDA.

Based on the company’s performance in 1Q17, Anthem (ANTM) has increased its 2017 revenue guidance by around $1.5 billion.

It’s projected that UnitedHealth Group’s revenue and earnings growth in 2015 will be driven by the strong performance of the Optum segments.

Given the high-risk profile of individual exchange enrollments, UnitedHealth Group has decided to offer plans only on a few public exchanges in 2017.

The Cigna–Anthem merger deal will be subject to all sorts of headlines that will affect the spread. You can make a decent return trading around the position by keeping your head .

If the Cigna–Anthem merger closes, you end up making about $35 a share. If the deal breaks, then you would have to cover at $52 a share.

Humana reported revenues of about $54.3 billion in its 2015 results. This amounts to a 12% revenue growth in 2015, compared to ~$48.1 billion in 2014.

UnitedHealth Group (UNH) has announced that its board of directors has authorized a cash dividend of $0.90 per share.

The Allergan–Pfizer merger will change Pfizer’s domicile to Dublin, Ireland, and allow them to gain access to overseas cash without a US repatriation tax.

On June 28, UnitedHealth Group (UNH) ended the trading day at $244.90, ~4.6% lower than its 52-week low of $183.86 reached on July 18, 2017.

In the Plum Creek Timber-Weyerhaeuser merger, Weyerhaeuser is paying about 7.4x trailing-12-month revenues and 25.4x trailing-12-month EBITDA.

UnitedHealth Group (UNH) released its Q3 2018 earnings today. UNH reported sales of $56.6 billion, up ~12.4% on a year-over-year basis.

UnitedHealth Group (UNH) is one of the largest Fortune 500 companies.

Cigna has been put ‘in play,’ which means other buyers will be taking a look. The spread is wide, but there are major unanswered questions. It makes sense to give this one a wide berth.

On June 21, Anthem (ANTM) filed a bear hug letter for Cigna (CI). A bear hug letter is a formal press release in which an acquiring company discloses its interest in a target company.

Today, UnitedHealth Group (UNH) reported its earnings results for the second quarter of fiscal 2018. The company reported sales of $56.1 billion, up ~12% on a (year-over-year) basis.

The healthcare bill’s failure had a negative impact on investor sentiment for health insurance carriers.

UnitedHealth Group (UNH) released its 4Q15 and full year 2015 earnings on January 19, 2015. The company registered diluted EPS attributable to common shareholders of $1.26 in 4Q15 and $6 for 2015.

UnitedHealth Group (UNH) stock registered its 52-week high of $270.17 last week on August 30.

Fortis (FRTSF) is buying ITC (ITC) in the largest Canadian purchase of a US utility. Fortis intends to sell a 19% stake in order to help finance the transaction.

With the Starwood-Marriott merger, the companies expect to generate at least $200 million in annual cost savings beginning in the second year after the deal closes.

Of the 24 analysts covering UNH stock, ten have recommended a “strong buy,” and 13 have recommended a “buy.”

Investor sentiment in the US was dampened by the weak April jobs report that was released May 6. The non-farm private payroll gained 169,000 jobs against median expectations of 200,000.

On March 14, 2018, UnitedHealth Group (UNH) ended trading at $225.38 per share.

Goldman Sachs (GS) has cut its Q4 growth forecast by 20 basis points. It now foresees the trade war impacting growth more than it previously forecast.

On Thursday, the Trump administration announced the withdrawal of the proposal to abolish rebates paid to pharmacy benefit managers by drugmakers.

In its fourth-quarter earnings press release, Anthem (ANTM) guided for 2019 operating revenue of $100 billion, a YoY (year-over-year) rise of $8.7 billion.

As of September 24, ten of the 24 analysts covering UNH stock have given it a “strong buy” recommendation.

Of the 23 analysts covering UNH stock, all of them have “buy” or “strong buy” recommendations for UnitedHealth Group.

On April 17, UnitedHealth Group (UNH) reported its 1Q18 earnings results. UNH stock rose ~3.6% from its April 16 closing price.

In December 2016, the U.S. Attorney’s office for the District of Massachusetts issued an indictment against six former Insys (INSY) employees.

In 1Q17, WellCare Health Plans’ (WCG) Medicare Health Plans business reported revenues close to $1.1 billion, which represents year-over-year growth of ~12.4%.

In 1Q17, WellCare Health Plans’ (WCG) Medicaid business reported revenues close to $2.6 billion, which equals year-over-year growth of ~11.8%.

Centene (CNC) has projected its health benefit ratio (or HBR) for the full year 2017 to fall in the range of 87.0% to 87.5%.

In 1Q17, around 12.1 million members were enrolled in Centene’s (CNC) various healthcare plans, which is a year-over-year (or YoY) rise of around 600,000 beneficiaries.

In 1Q17, UnitedHealth Group’s (UNH) UnitedHealthcare business witnessed a 2.5 million year-over-year increase in customers.

In its bid to control healthcare costs, UnitedHealth Group’s (UNH) OptumRx segment has been actively deploying data analytics across its Optum platform.

Optum360, UnitedHealth Group’s (UNH) hospital revenue cycle management solution, is expected to reach $60.0 billion in billings for clients and partner organizations.

Mylan’s (MYL) 3Q16 revenues were mainly driven by a 17.0% rise in sales for its Generics segment. The segment reported $2.6 billion in sales in 3Q16.

If the merger caused cable providers to drop Starz because they didn’t want to work with Lions Gate, it wouldn’t be a MAE (material adverse effect).

According to the MAE (material adverse effect) clause of the Starz-Lions Gate deal, legislation that limits intellectual property protection wouldn’t be considered a MAE.

In the merger deal between Lions Gate Entertainment (LGF) and Starz (STRZA), the MAE (material adverse effect) clause lays out the circumstances under which either party can back out of the transaction.

In this part of the series, we’ll look at the MAE clause of the Amsurg (AMSG) merger agreement with Envision Healthcare (EVHC) and how Amsurg could back out of the deal.

Traditionally, arbitrage desks would have a portfolio of 40–50 “safe” transactions, and these make up the bread and butter of their returns.

Demandware (DWRE) was trading at about $48 per share before the deal was announced.

Salesforce.com (CRM) is buying e-commerce cloud computing firm Demandware (DWRE) in a $2.8 billion transaction. The merger is structured as a tender offer.

On June 1, Salesforce.com (CRM) announced it was buying Demandware (DWRE) in a $2.8 billion transaction.

In the Monsanto-Bayer deal, Bayer’s shareholders should expect to see mid-single-digit accretion to core EPS (earnings per share) in the first year and double-digit accretion thereafter.

UnitedHealth Group’s healthcare delivery business, OptumHealth, managed to earn $4 billion revenues in 1Q16, which represents a YoY growth of about 22%.

In its 1Q16 conference call, Anthem updated its 2016 revenue guidance to $81 billion–$82 billion—higher than the previous projection by about $1 billion.

On April 28, Abbott Labs and St. Jude Medical announced an agreement where Abbott will buy St. Jude for $30 billion in cash, stock, and assumed debt.

Samsonite will need to file for merger approval under the Hart-Scott-Rodino Antitrust Improvements Act. The companies will need to file for Canadian antitrust approval.

Hong Kong-based Samsonite is buying luxury brand Tumi (TUMI) in a $1.8 billion deal. Samsonite is mainly known as a utilitarian luggage company.

Centene managed to increase its public exchange membership from 75,000 members in 2015 to 146,000 members in 2015.

Aetna’s Humana acquisition is mainly aimed at increasing the combined companies’ exposure to the high-growth Medicare business. The deal is currently being scrutinized by antitrust regulators.

Shire is a biopharmaceutical company that focuses on rare diseases. Shire is best known for its treatments in ADHD, and the market here is quite large.

The Baxalta–Shire merger could create the top platform for rare diseases in the world. Baxalta brings Advate, a treatment for hemophilia, a rare blood disease.

The MAE (material adverse effect) clause is one of the first things arbitrageurs look at in a merger agreement. Let’s examine the Allergan–Pfizer merger’s MAE.

In the case of the Allergan–Pfizer merger, the MAE clause lays out the circumstances where Pfizer (PFE) can back out of its merger with Allergan (AGN).

The large-cap stocks of the iShares US Healthcare Providers ETF (IHF) rose marginally with a return of 0.35%. They outperformed IHF and SPY.

If the Allergan-Pfizer merger closes, the spread goes to zero, and you make about $52. If the deal breaks, you lose about $70.

This is a second series related to the Allergan-Pfizer merger. We’ll discuss the background of the two companies and look at the Material Adverse Effect Clause.

The Allergan-Pfizer merger will generate estimated peak synergies of $2 billion per year, which will take about three years to realize.

Given the antitrust risk in the Plum Creek Timber-Weyerhaeuser merger, it probably should trade at a risk-to-reward ratio of about 5:1, which works out to a spread of $1.66 and an annualized spread of 9%.

The spread in the Plum Creek Timber-Weyerhaeuser merger is trading slightly negatively (about 6 cents), but the positive dividend carry gives the deal a positive spread.

The Health Care Select Sector SPDR ETF tumbled -1.7% on November 19 after UnitedHealth Group lowered its profit expectations for 2015 and cut its earnings forecast.

The MAE (material adverse effect) clause lays out the circumstances under which Walgreens Boots Alliance (WBA) can back out of its merger with Rite Aid (RAD).

In the Plum Creek Timber-Weyerhaeuser merger, Weyerhaeuser (WY) and Plum Creek Timber (PCL) anticipate annual cost synergies of $100 million.

The equity value of the Plum Creek Timber-Weyerhaeuser merger is about $8.4 billion and $11.4 billion if you include debt.

In the Plum Creek Timber-Weyerhaeuser merger, Weyerhaeuser Company (WY) has agreed to buy Plum Creek Timber Company (PCL) for $8.4 billion in stock.

The Rite Aid–Walgreens merger is expected to be accretive to Walgreens Boots Alliance’s adjusted earnings per share in the first year after completion.

In 3Q15, despite a rise of total revenues by 27% year-over-year, which includes 10% organic growth, UnitedHealth Group reported a decline of about 1% in net profit margins.

The MAE clause is one of the first things arbitrageurs look at in a merger deal. In the Cigna-Anthem deal, the MAE clause states when either company can back out of the deal.

Based on market capitalization, UnitedHealth Group appears to be a stronger partner for Cigna.

Centene aims to position itself as a leader in the fast-growing Medicaid market. Health Net’s acquisition will add ~1.7 million Medicaid members to the company’s portfolio.

The key to the merger between Cigna (CI) and Anthem (ANTM) is understanding the process companies go through when approached with an unsolicited proposal.

Anthem refers to the deal premium based on Cigna’s stock price on May 28. That date is as good as any to fix the Anthem stock ratio. On May 28, Anthem closed at $164.22.

Humana’s (HUM) revenues from commercial enrollments increased by 28.4%, from $2.2 billion in 1Q14 to $2.8 billion in 1Q15.

Looking at the US economy for the last three years might help us understand which phase of the business cycle the US economy is in right now.

Centene (CNC) faces a unique combination of business risks as well as risks specific to the health industry (IYH). Centene has a highly concentrated business mix.

Anthem’s mergers and acquisitions strategy mainly targets the company’s government-sponsored business.

For health insurance companies, the medical care ratio is the ratio of total money spent on healthcare claims to premiums earned—adjusted for tax and regulatory expenses.

Anthem’s medical care ratio declined from 87.8% in 2013 to 83.1% in 2014, as a result of its favorable enrollment mix.

In 2014, of Anthem’s three business segments, Commercial and Specialty accounted for 53.7% of total revenues, and Government Business contributed 46.3%.

In the commercial business, self-insured coverage means the employer is responsible for the probable claim obligations of the employees.

UnitedHealth Group (UNH) is a health insurance provider. It faces a unique combination of business risks, including business mix and competition risks.

The medical care ratio measures a health insurance company’s financial health. Aetna’s (AET) medical care ratio declined from 83.9% in 4Q13 to 83% in 4Q14.

In the private health insurance industry, the operating expenses mainly involve the costs for providing hospital benefits and emergency services.

Managed care organizations (XLV) enter into a contract with a set of health care providers, or a provider network, to provide care for members at reduced costs.

Aetna (AET) derives 58% of its operating revenues from its commercial business, which involves offerings such as fully insured health plans and self-insured health plans.

With a market capitalization of $35.1 billion, Aetna (AET) is one of the largest insurance providers in the US.

Health insurance companies (XLV) use diversification strategies across markets, products, and services to maintain their operating margins.

In 2014, OptumInsight released a population health analytics tool—OptumOne. It enables hospitals to improve the quality of care.

Medicare Part D is a federal government program. It subsidizes prescription drug expenses for Medicare beneficiaries.

The private health insurance industry offers a diverse range of products. The products combine health plans with financial accounts to cater to different consumers’ needs.

Employer-sponsored coverage, a major form of insurance, increasingly adopted self-insured plans. They’re more cost-effective and flexible than fully-insured plans.

Humana’s core strategy is an integrated care delivery model. Its Healthcare Services segment provides the required ancillary services.

Humana’s retail insurance business segment contributes 66.5% of overall company revenues. Employer-sponsored programs follow with 27.6%.

Humana (HUM) is the third-largest health insurance provider in the US, with over 13 million customers. Humana is also 73rd in Fortune 500 rankings.

The operating expenses of the private health insurance industry depend on the design of health plans and on the life history, age, and health of enrollees.