Signify Health shares jump as Amazon, UnitedHealth reportedly among bidders for takeover deal

Signify Health shares jumped nearly 40% premarket Monday morning as reports surfaced that Amazon and UnitedHealth Group are both eyeing a bid for the home health technology and services provider.

Signify is for sale in an auction that could value it at more than $8 billion, The Wall Street Journal reported, citing people familiar with the matter. Bids are due around Labor Day, according to the sources.

The company has been exploring strategic alternatives, the WSJ previously reported, with CVS Health considering a takeover bid to become a bigger provider of medical services.

Amazon, UnitedHealth and Option Care Health now appear to be bidders as well, according to WSJ's reporting.

UnitedHealth has submitted the highest bid in excess of $30 a share, Bloomberg reported. Amazon’s offer is close behind, according to people close to the matter who asked not to be identified as the discussions are private.

A deal with Amazon would mark the online retail giant's second major healthcare acquisition in 2022 after its nearly $4 billion bid for One Medical.

Signify is holding a board meeting Monday to discuss the bids, according to media reports.

Signify uses analytics and technology to help health plans, employers, physician groups and health systems with in-home care. The company launched in December 2017 as the result of a merger between CenseoHealth and Advance Health. Signify went public in February 2021, but its shares have traded below their $24 IPO price. Earlier this year, the company acquired accountable care organization builder Caravan Health for $250 million. 

The company announced in July it was winding down its episodes of care business and plans to exit a major bundled payment program. Signify signaled it will continue to focus on its growing home and community services segment, including its recent acquisition of Caravan Health. 

As a result of the shift away from its episodes-of-care business, the Dallas-based company laid off nearly 500 people a month ago.

Signify Health's core business centers on home visits and home-based interventions, particularly around identifying and addressing gaps in risk adjustment for payers. It offers in-home health evaluations for Medicare Advantage and other government-run managed care plans.

The company provides an entry point into a unique healthcare space around patient medical risk, payer contracts and relationships and also offers a ton of data, according to Nathan Ray, who leads the healthcare merger and acquisition division at consultancy West Monroe.

"It's almost a toolbox for where a lot of different footprints for the evolving healthcare landscape are going," he said in an interview.

Amazon has been pushing further into healthcare with Amazon Care, its service that provides both in-person care and telehealth for employers.

The tech giant has been an opportunistic buyer, Ray noted. "They buy things that they think are uniquely situated to emphasize their impact on the markets they are in. Both Signify Health and One Medical are novel in very similar ways with unique value delivery models, some tech enablement and broad national capabilities," he said. "This plus One Medical gives it a very interesting playbook not just to deliver care to patients or employers but also to work with payers themselves."

UnitedHealth Group's holdings include the sprawling Optum subsidiary that consists of the data analytics arm Optum Insights and the Optum Health arm, one of the country's largest employers of physicians. The company is expanding its home health services business through acquisitions. In March, UnitedHealth Group announced it would acquire home healthcare provider LHC Group for $170 per share in cash, or about $5.4 billion.

Scooping up Signify Health would play into UnitedHealth's vertical integration strategy, Ray said. "As these types of capabilities become the necessary building blocks to the future of healthcare, they like to be first in line to own, particularly with the best-in-class solutions. United and Optum also do similar services themselves so it may be a signal that they think it would be good either for scale or for advantage, technically, or operationally, to have this versus build it out better themselves," he said.

It's an ideal time for an M&A deal for Signify as the company is focused on the Medicare Advantage market, according to Ray.

"I think operationally this provides a good financial window and a good kind of disruption window, particularly for Signify to get something done," he noted, adding, "With the downbeat of the market, this is providing a price opportunity for an acquirer."

The competition for healthcare companies is heating up. CVS said it plans to make a big move in primary care by investing or acquiring a provider by the end of this year.

Along with the Amazon-One Medical deal, CVS rival Walgreens is doubling down on primary care and home health. The company invested $5.2 billion in primary care company VillageMD last year, boosting its stake in the company as it looks to open hundreds of new clinics across the U.S. 

Last fall, Walgreens also announced a $330 million majority-stake investment in post-acute and home care company CareCentrix, which will also be operated under Walgreens Health. The CareCentrix investment will give Walgreens an initial 55% stake of the company at an $800 million valuation, with an option to raise the stake in the future, Walgreens executives said.

Walmart also has ambitions in healthcare. The retailer operates about 20 in-person clinic locations across Georgia, Arkansas, Illinois and now Florida, with locations attached to its supercenter stores. These health centers offer a slew of services at a flat fee, including primary care and dental care as well as labs and imaging.