Missouri-based Centene has agreed to acquire rival US health insurance company WellCare Health Plans in a cash-cum-stock deal worth $17.3bn.
The merger of Centene and the Florida-based WellCare is expected to result in the formation of a new healthcare enterprise, which will be engaged in government-sponsored healthcare programs apart from being a leading player in Medicaid, Medicare and the health insurance marketplace.
As per the terms of the deal, Centene will acquire the Florida-based company for $305.39 per share. In this connection, WellCare’s shareholders will get a fixed exchange ratio of 3.38 shares of Centene common stock along with $120 in cash for each of their shares.
WellCare CEO Ken Burdick said: “By combining with Centene, we will create a more competitive, diversified company that is better able to deliver fully integrated, high-quality, cost-effective services for our members and government partners.
“Both companies share a deep history and focus on the government-sponsored healthcare market and, together, our expertise will allow us to deliver enhanced value for our shareholders, opportunities for our associates and better outcomes for our members.”
Post-merger, Centene’s shareholders will own about 71% stake in the combined entity, while WellCare’s shareholders will owning the remaining stake of around 29%.
The combination of the two health insurers is expected to have significant product diversification and the scope to better serve members.
WellCare brings to Centene a high-quality Medicare platform while further extending its Medicaid offerings.
The enlarged company will operate 31 NCQA accredited health plans and is likely to have enhanced exposure to government-sponsored healthcare solutions through WellCare’s Medicare Prescription Drug Plans and Medicare Advantage.
Centene chairman and CEO Michael Neidorff said: “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 has grown significantly by adding capabilities that have increased revenues and enabled margin expansion. The addition of WellCare is the next logical step in our growth strategy and to drive value for our collective shareholders.”
The combined entity, which will be headquartered in St. Louis, Missouri, will have close to 22 million members in all the 50 US states.
Its estimated pro forma 2019 revenues are expected to be around $97bn, based on the latest 2019 outlooks as disclosed by the two health insurance companies.
The transaction, which will be subjected to shareholders’ approvals of both the companies, various state regulatory approvals and other conditions, is expected to be closed in the first half of 2020.an