04:02 PM EDT, 03/25/2024 (MT Newswires) -- UnitedHealth Group's ( UNH ) proposed acquisition of Amedisys ( AMED ) is likely to be completed despite regulatory scrutiny, due in part to the high fragmentation of the home care sector, according to RBC Capital Markets.

The brokerage in a Monday note increased its price target on Amedisys's ( AMED ) stock to $100 from $97 and reiterated an outperform rating, saying it expects the deal to go through "given strong precedent for carriers operating home health assets and the high fragmentation across the home care sector, even pro forma for the combination."

Analyst Ben Hendrix trimmed his fiscal 2024 earnings per share target for Amedisys ( AMED ) to $4.59 from $4.88 previously and his revenue estimate to $2.29 billion from $2.35 billion. Analysts on average are modeling for normalized EPS of $4.55 and revenue of $2.33 billion for the ongoing year, according to a Capital IQ survey.

UnitedHealth ( UNH ) offered to buy Amedisys ( AMED ) last June for $100 per share in cash, which media outlets reported at the time valued the deal at $3.3 billion. The Department of Justice and the Federal Trade Commission requested additional information last summer as part of a so-called "second request" about the merger, increasing concerns about the deal's viability.

Last week, new unconfirmed media reports, including from Seeking Alpha and Home Health Care News, suggested the DOJ is "strongly considering a suit over the pending combination," according to RBC Capital Markets.

The brokerage updated its downside and deal-break scenario to value Amedisys' ( AMED ) shares to $74, which represents 20% downside from current trading prices, a discount to peers, and a slight discount to preannouncement trading levels. However, Hendrix views that as a "less likely" scenario.

He also sees a comparatively smaller anti-competitive concern about vertical integration of UnitedHealth ( UNH ) and Amedisys ( AMED ) than was reflected in UnitedHealth's ( UNH ) acquisition of Change Healthcare, which the DOJ unsuccessfully attempted to block prior to its October close.

"While UnitedHealth ( UNH ) has acknowledged that the Amedisys ( AMED ) deal is taking longer than expected, we believe the timing remains consistent with the longer-than-expected review of the (LHC Group) deal, whose close date fell 254 days after the FTC's June 2022 second request," Hendrix wrote. The DOJ's second request for the Amedisys ( AMED ) takeover was sent 227 days ago, RBC said.

Price: 485.16, Change: -4.91, Percent Change: -1.00