Centene to buy smaller rival WellCare in $17.3bn deal
US health insurer Centene has agreed to buy smaller rival WellCare in a $17.3bn cash and stock deal.
CENTENE
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00:00 09/05/24
Under the terms of the transaction, which has been unanimously approved by the boards of both companies, Centene will buy WellCare for $305.39 a share. WellCare shareholders will receive a fixed exchange ratio of 3.38 shares of Centene common stock and $120 in cash for each of their shares.
The cash and stock consideration represents a premium of about 32.1% to the closing price of WellCare on Tuesday.
The combined entity would have approximately 22 million members across all 50 states in the US and the combination is expected to generate about $500m of annual net cost synergies by year two.
This will be driven by the ability to capitalise on economies of scale in pharmacy and other medical cost management, leveraging WellCare's Medicare capabilities across markets, optimising capabilities in IT systems and process management, as well as increased efficiencies in G&A.
Centene's chief executive officer and chairman, Michael F. Neidorff, said: "This transformational combination creates a leading healthcare enterprise that is committed to helping people live healthier lives through a localised approach and provides access to high-quality healthcare through a wide range of affordable health solutions.
"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."
At 1055 GMT, Centene shares were down 5.5% in pre-market trade at $51.83, but WellCare shares were up 17% at $271.