UnitedHealth to buy DaVita primary care unit for $4.9 billion

(Reuters) – U.S. health insurer UnitedHealth Group Inc on Wednesday announced a $ 4.9 billion deal to buy a unit of DaVita Inc, looking to bolster its primary and urgent care services.

FILE PHOTO: The logo of Down Jones Industrial Average stock market index listed company UnitedHealthcare is shown in Cypress, California April 13, 2016. REUTERS/Mike Blake/File Photo

The all-cash deal is UnitedHealth’s second major acquisition in 2017 that aims to broaden its reach beyond insurance and boost its outpatient care services through a large network of clinics.

UnitedHealth bought Surgical Care Affiliates for about $ 2.3 billion in March.

The deal with Denver-based DaVita, which mainly provides dialysis services, will combine UnitedHealth’s Optum unit with DaVita’s physician network business that serves about 1.7 million patients each year through nearly 300 clinics.

Besides running urgent care clinics, Optum manages drug benefits and offers data analytics services to industry clients.

DaVita’s physician network unit recorded sales of $ 4.11 billion last year but had become a major drag on the company’s financial performance in recent quarters despite contributing 30 percent to total revenue.

News of the deal sent DaVita shares up 9.3 percent to $ 66.61 in premarket trading on Wednesday.

DaVita plans to use the proceeds of the sale for stock buybacks and to repay debt.

Reuters reported last month that DaVita was exploring a sale of its medical unit.

Reporting by Divya Grover in Bengaluru; Editing by Arun Koyyur and Sai Sachin Ravikumar

Our Standards:The Thomson Reuters Trust Principles.

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