Centene to Acquire WellCare for $17.3B
Centene Corporation and WellCare Health Plans have announced that Centene will acquire WellCare in a cash and stock transaction for $305.39 per share based on Centene’s closing stock price on March 26, 2019 for a total enterprise value of $17.3 billion pursuant to the terms of a definitive merger agreement. The transaction, which has been unanimously approved by the Boards of both companies, will create a premier healthcare enterprise focused on government-sponsored healthcare programs and a leader in Medicaid, Medicare and the Health Insurance Marketplace.
Together, the combined company will have meaningful product diversification and the opportunity to better serve members, help them achieve better health outcomes and drive growth. The enterprise would have approximately 22 million members across all 50 states in the U.S. The enterprise would also be expected to have estimated pro forma 2019 revenues of approximately $97 billion and $5 billion in EBITDA, based on the most recent 2019 outlooks publicly reported by both companies.
“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,” said Ken Burdick, WellCare’s Chief Executive Officer. “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.”
“I could not be more excited to have the next chapter of WellCare’s successful journey be as part of the Centene organization,” said Christian Michalik, Chairman of the WellCare Board of Directors. “This transaction is a testament to the mission-driven company the WellCare team has built, and their unrelenting focus on putting members first. As part of the combined company, our shareholders can look forward to a continued bright future as Centene increases its scale and delivers diversified services to meet the needs of the communities both companies serve.”
Strategic and Financial Benefits of the Transaction
- Delivering Significant Benefits to Members and Government Partners Through Increased Scale and Diversified Services. The combined company would be the leader in government-sponsored healthcare with increased scale and diversification both geographically and in its managed care service offerings, and enhance access to high-quality services for members. It will offer affordable and high-quality products to its more than 12 million Medicaidand approximately 5 million Medicare members (including Medicare Prescription Drug Plan), as well as individuals served in the Health Insurance Marketplace and the TRICARE program. 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. It will also benefit from leveraging Centene’s growing position in the Health Insurance Marketplace to new markets. The transaction creates a company with the size and scale to better serve members through enhanced healthcare programs, expanded capabilities and increased investment in technology.
- Sharing a Commitment to Local Communities. Centene and WellCare share strong commitments to the communities in which their employees and members live and work. The combined company will enhance its already robust 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.
- Expanding National Footprint. With the addition of WellCare’s markets, and its healthcare plans in Hawaii, Kentucky, and New Jersey, and enhanced presence in Michigan, the combined company will operate nationally, while maintaining a local approach. The combination will also create new opportunities for Centene to provide health solutions and innovative programs across a wider footprint for the benefit of all stakeholders.
- Delivering Shareholder Value and Earnings Accretion. The transaction is expected to generate adjusted diluted earnings per share accretion of approximately mid-single digits in year two following closing, with long-term growth opportunities and cost reduction across markets and products. The transaction is expected to be slightly dilutive to adjusted earnings per share in year one.
- Achieving Cost Synergies. The combination is expected to generate approximately $500 million of annual net cost synergies by year two, driven primarily by the ability to capitalize on economies of scale in pharmacy and other medical cost management, leveraging WellCare’s Medicare capabilities across markets, optimizing capabilities in IT systems and process management, as well as increased efficiencies in G&A. These synergies would be in addition to the previously communicated efforts of Centene Forward.
