One of the few bright spots in the market this year has been Change Healthcare (NASDAQ:CHNG). On a year-to-date basis, CHNG stock is up approximately 29%. Today, it’s soaring more than 6% after the company was approved to merge with UnitedHealth (NYSE:UNH) by a Washington federal judge.
U.S. District Judge Carl Nichols effectively denied the Justice Department in its attempt to stop this merger. By agreeing to divest the company’s ClaimsXten division to TPG Capital, Change Healthcare appears to have satisfied antitrust concerns.
The Justice Department sought to block the deal initially on concerns that United Health, the largest health insurer in the U.S., would effectively be able to access competitor data and raise prices for insurance. It appears some sort of appeal may be in the works, with officials said to be reviewing this ruling.
Perhaps this saga isn’t over yet. That said, let’s dive more into why Change Healthcare is soaring today.
CHNG Stock Surges On Favorable Court Ruling
This $13 billion transaction is one of the largest we’ve seen in the healthcare space in some time. UnitedHealth’s previous offer of $7.84 billion in cash and $5 billion in debt certainly has provided CHNG stock with a catalyst. Announced early last year, this deal is one of the key reasons Change Healthcare has so vastly outperformed the market.
As it happens, UNH and CHNG stock investors both appear to be pleased by this ruling. UnitedHealth will not have to pay its breakup fee, and Change Healthcare investors will realize the full value of this acquisition, which was not previously fully priced in.
As mentioned, there’s still some risk of this deal falling through. Accordingly, CHNG stock may trade at some sort of discount until the deal is finalized. That said, those looking for an arbitrage bet may be willing to bid shares up pretty close to the acquisition price. As of the time of writing, it appears most of the premium has been priced in.
Thus, CHNG stock looks like it’s going to be stable from here. For most investors, this company isn’t worth the risk, one way or the other, to step into it ahead of the merger. That said, should more news flow come in before the deal is done, this is a stock to watch for some potential volatility.
On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
