Healthcare enterprise Centene will purchase smaller rival WellCare Health for $15.27 billion in a cash-and-stock deal, with the combined company to have approximately 22 million members across all 50 states.
WHY IT MATTERS
WellCare brings to Centene a Medicare platform and further extends Centene's Medicaid offerings, improving access to more comprehensive and differentiated solutions to its more than 12 million Medicaid and approximately 5 million Medicare members.
The price puts WellCare's stock value at $305 per share, a 32 percent premium to the Tuesday closing price, in a deal the companies said was valued at $17.3 billion, including debt.
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The combined company will operate 31 NCQA-accredited health plans across the country, and will have increased exposure to government-sponsored healthcare solutions through WellCare's Medicare Advantage and Medicare Prescription Drug Plans.
The combination is expected to generate approximately $500 million of annual net cost synergies by the second year, and the new company will also leverage Centene's growing position in the Health Insurance Marketplace to include new markets.
The combined enterprise will also be used to enhance efforts to address the social determinants of health such as food insecurity, housing instability, homelessness, unemployment, lack of access to transportation and other non-medical barriers to health.
Centene said it intends to primarily fund the cash portion of the acquisition through debt financing, with Barclays providing an $8.35 billion financing commitment.
ON THE RECORD
"With the addition of WellCare, we expect to bolster and diversify our product offerings, increase our scale and have access to new markets, which will in turn, enable us to continue investing in technology and better serve members with innovative programs designed to meet their needs," Centene chairman and CEO Michael Neidorff said in a statement.
He noted Centene has grown "significantly" by adding capabilities that have increased revenues and enabled margin expansion, calling the addition of WellCare "the next logical step" in the company's growth strategy.
WHAT ELSE TO KNOW
Neidorff will lead the combined company as chairman and CEO, while Ken Burdick and Drew Asher are expected to join the Centene senior management team in new positions created as a result of the acquisition.
"We are enthusiastic about the opportunity to create a high-performing combined business focused on government-sponsored managed care that will bring benefits to all of our stakeholders," WellCare CEO Burdick said in a statement. "Both companies share a deep history and focus on the government-sponsored healthcare market and, together, our expertise will allow us to deliver better outcomes for our members."
The combined company will be headquartered in Centene's homebase of St. Louis, with operations throughout the country, as well as substantial operations in WellCare's home state of Florida.
Centene and WellCare said they expect to complete the transaction in the first half of 2020, with the transaction also conditioned on clearance under the Hart-Scott Rodino Act and receipt of required state regulatory approvals.
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