As Centene Corp. pondered whether to pursue WellCare Health
Plans, Inc., Centene's board moved forward partly due to its belief the
combined company —with 22 million members across all 50 states — would have
"increased scale, meaningful product diversification and increased
geographic reach."
Centene also felt the draw of attracting more business within
the fast-growing Medicare Advantage program and was confident of its ability to
handle complex deals having taken Fidelis Care under its wing in 2018.
It wasn't all smooth sailing, though. Negotiations broke off at
one point due to the stock market's downturn and how this stood to affect the
proposed cash/stock deal. Talks soon resumed, however, culminating in an
agreement after several months involving multiple proposals.
So states Centene's Form S-4 filed May 23 with the SEC, which
unveils numerous details about Centene's planned $17.3 billion acquisition of
WellCare, announced March 27.
Centene expects the merger to generate roughly $500 million of
annual net synergies by the second year following the deal’s completion, and
pre-tax run rate synergies of more than $700 million, according to the filing.
Leerink analyst Ana Gupte summed up the recent filing by saying
it shows Centene's "resolve" in creating a massive combined managed
care company focusing on the government-sponsored health insurance business.
"Overall, we believe the deal was an offensive move,
combining the highest growth companies in the fastest growing sector,"
Gupte said in a May 24 note to investors. "We see the combined almost
[roughly] $100 billion entity as set to be a Government powerhouse driving both
cost and revenue synergies for multiple years to come."
From Health Plan Weekly
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