Simpson Thacher’s client, Change Healthcare, closed its $13.8 billion combination with the Optum business unit of UnitedHealth Group on October 3, 2022. The closing comes after Simpson Thacher secured a high-profile antitrust victory for Change Healthcare, when U.S. District Judge Carl J. Nichols rejected the U.S. Department of Justice’s (DOJ) challenge to the deal. The U.S. District Court ruled on September 19, 2022, which paved the way for the completion of the deal this morning. A related transaction, the $2.2 billion divesture of Change’s ClaimsXten business unit to TPG, is expected to close soon.
The court’s ruling, which is the Biden Administration’s first loss in a litigated merger case, denied all of the government’s claims and represents a rare case of parties successfully “litigating the fix.” The government had opposed the merger on the basis of both horizontal and vertical theories of harm. In the horizontal context, the government claimed that the merger would result in an effective monopoly in “first pass claims editing” while the parties argued that a divestiture of Change Healthcare’s ClaimsXten business would remedy the alleged harm. In the vertical context, the government argued that the merger would give UnitedHealth Group access to sensitive data of rival insurers, which would in turn reduce competition among health insurers and that UnitedHealth Group would also delay or deny access for its competitors to future innovative products. In his opinion, the court rejected the vertical theories, and ruled that the companies need only divest ClaimsXten in order to address the DOJ’s horizontal concerns.
Following the announcement of the merger in January 2021, Change Healthcare complied with a DOJ Second Request investigation, beginning in March 2021. In February of 2022, the DOJ, which was joined by the States of New York and Minnesota, filed a complaint seeking to enjoin the proposed transaction. Change Healthcare filed its Answer in March 2022, and a 12-day trial began on August 1, 2022 and concluded on August 15, 2022. The parties’ closing arguments were presented on September 8, 2022. Cleary Gottlieb Steen & Hamilton was co-counsel with the Firm for the trial.
The Simpson Thacher Antitrust team included Sara Razi, Abram Ellis, Preston Miller, Daniel Owsley, Christopher Kraft, Geoffrey Schmelkin and Jared Quigley. The Firm’s Mergers and Acquisitions team included Eric Swedenburg, Jonathan Corsico, Benjamin Bodurian and Erin Harvey. The Simpson Thacher team also included Gregory Grogan, Caitlin Lucey and Guanxiong Xu (Executive Compensation and Employee Benefits); Andrew Purcell, Edward Grais and Scott Grundei (Tax); Lori Lesser, Alysha Sekhon and Kate Mirino (Intellectual Property); Vanessa Burrows (Healthcare); Joshua Bonnie, William Golden, Jonathan Ozner, Lia Toback and Patrick McCamy (Capital Markets); and Brian Gluck (Banking and Credit).