Market Overview

Centene Buys Health Insurer Rival WellCare In $15B Deal

Centene Buys Health Insurer Rival WellCare In $15B Deal

Health insurer Centene Corp (NYSE: CNC) said Wednesday it reached an agreement to acquire WellCare Health Plans, Inc. (NYSE: WCG), a provider of government-sponsored managed care services, for more than $15 billion.

What Happened

The combination of St. Louis-based Centene and Tampa-based WellCare will create a new health care enterprise company that will be a leader in Medicaid, Medicare and the Health Insurance Marketplace, the companies said in a press release. The combined entity will better position the new company to offer access to more comprehensive and differentiated solutions with a focus on affordable, high-quality, culturally-sensitive services.

WellCare investors will receive a fixed exchange ratio of 3.38 shares of Centene stock in addition to $120 in cash for each share of WellCare owned.

At a per-share value of $305.39 based on WellCare's Monday closing price, the companies said this deal implies a total enterprise value of $17.3 billion.

Why It's Important

The companies highlighted the following strategic and financial benefits of the transaction:

  • Leverage an increased scale and diversified services to better offer benefits to members and government partners.
  • Offer a wider footprint to all stakeholders.
  • Deliver shareholder value as the deal is expected to be accretive to EPS by a mid-single digit in year two of closing.
  • 4Generate approximately $500 million of annual net cost synergies by year two.

What's Next

Centene plans to finance the cash portion of the transaction through debt financing and is expected to close in the first half of 2020. The two companies are estimated to generate $97 billion in revenue and $5 billion in EBITDA throughout 2019.

Shares of Centene were trading lower by more than 10 percent ahead of Wednesday's open, while WellCare's stock was up by more than 10 percent.

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