January 07, 2021 - 12:54pm EST by
2021 2022
Price: 23.75 EPS -0.77 n/a
Shares Out. (in M): 304 P/E n/a n/a
Market Cap (in $M): 7,250 P/FCF n/a n/a
Net Debt (in $M): 5,000 EBIT 0 0
TEV ($): 12,250 TEV/EBIT n/a n/a

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This is a short write-up about an attractive special situation that's merger arbitrage cash deal. You get a low risk potential IRR of at least 18% by the time the deal closes. 

Change Healthcare, (symbol: CHNG) is being acquired by UnitedHealth for $25.75 in cash, expected to close 2nd half of 2021. The spread is currently 7.5 to 8.5% and annualized IRR is about 18% depending on the close date. 

I do not see regulatory or financial risk. In fact, a few days ago, Centene is acquiring Magellan for cash and the spread is near zero. 

I talked to a couple of specialists in M&A arbitrage and they also do not see much risk.  Their only thought is that maybe the recent political events are giving people a wait and see attitude with health care legislation.  However, given Centene's deal of Magellan Health is near zero spread, it's hard to explain that.  They do not see antitrust issues either.  

In the press release, United Health sees earnings being accretive. 

Blackstone, a 20% owner has approved the deal.  Rumor is Blackstone got tired waiting for a higher offer. If anything, there is a chance a competing higher offer can come in after covid pandemic issues subside. Even if deal fails, the stock has been acting well as a growth story with good technical price action.

Dan Loeb of Third Point is an owner in this stock and so is the highly respected Fidelity Contrafund. 

Since this company is a technology platform, the value is in the scalability of absorping CHNG's product as it is absorbed by UnitedHealth and past EBITDA are not really applicable.

I'm not gonna post financial data and other things as that is not important. 

Change Healthcare Inc., an independent healthcare technology platform, provides data and analytics-driven solutions to enhance clinical, financial, administrative, and patient engagement outcomes in the United States healthcare system. It operates through three segments: Software and Analytics, Network Solutions, and Technology-Enabled Services. The Software and Analytics segment offers software and analytics solutions for financial performance, payment accuracy, clinical decision management, value-based payment, provider and consumer engagement, and imaging and clinical workflow. The Network Solutions segment enables financial, administrative, and clinical transactions; electronic business-to-business and consumer-to-business payments; and aggregation and analytics of clinical and financial data. The Technology-Enabled Services segment provides solutions for financial and administrative management, value-based care, communication and payment, pharmacy benefits administration, and healthcare consulting. The company was founded in 2016 and is headquartered in Nashville, Tennessee




I hold a position with the issuer such as employment, directorship, or consultancy.
I and/or others I advise hold a material investment in the issuer's securities.


Being acquired by UnitedHealth for $25.75 in cash.

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