Centene-WellCare Merger Wins Proxy Advisor’s Support

Bruce Japsen Jun 12, 2019, 10:36am

Centene and WellCare Health Plans said its merger has earned a vote of confidence from influential shareholder advisor Institutional Shareholder Services.

The endorsement of by ISS of the Centene WellCare deal is more good news for the transaction, which still faces a rigorous review by antitrust regulators, but has had reports some small hedge funds want a different deal. Earlier this month, Humana said it’s not interested in being sold to Centene, which some investors reportedly wanted to see.

"The company did not conduct an auction, and the merger consideration is below the company's all-time high closing price," ISS said in its evaluation that recommended Centene and WellCare shareholders support the deal. "However, the merger appears sound strategically and financially, and the merger consideration implies meaningful premia to the company's historical valuation and its unaffected price. As such, support for the transaction is warranted."

Centene announced plans to buy WellCare for more than $15 billion at the end of March, creating a national health insurance company with expertise in administering Medicaid, Medicare and individual coverage under the Affordable Care Act.

Stories emerged that some small Centene investors led by a couple of hedge funds wanted Centene to consider a buyout by Humana, which is only beginning to grow its Medicaid business and has a large number of Medicare Advantage plans. Humana, however, made a rare public statement regarding merger speculation and said it wasn't interested in a deal with Centene. Meanwhile, analysts said major institutional investors are also backing the Centene-WellCare transaction.

ISS seemed to indicate WellCare did its due diligence before agreeing to a sale to Centene.

"Over the past two years, WellCare has held preliminary discussions with several companies regarding potential business combinations, strategic partnerships, and other transactions; in those discussions, WellCare did not receive any acquisition proposals from interested parties," ISS said in its evaluation.

https://www.forbes.com/sites/brucejapsen/2019/06/12/centene-wellcare-earns-key-proxy-advisors-support/#35a088631fdc