M&A

Centene Goes West With $6B Health Net Deal

The acquisition is part of a recent wave of M&A activity in the health-insurance industry.
Matthew HellerJuly 2, 2015

A whirlwind of merger-related activity in the U.S. health-insurance industry continued Thursday as Centene Corp. announced it had agreed to acquire Health Net for $6.8 billion.

The deal combines two managed-care providers that have more than 10 million members between them and an estimated $37 billion in revenue. It would also give Centene a larger market presence in the Western United States.

“Health Net’s presence in California and other key Western states is complementary to our offerings, allowing us to bring additional innovative solutions to the healthcare market,” Centene CEO Michael Neidorff said in a news release.

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“Together, we will build on both companies’ shared commitment to working with providers and key community stakeholders to achieve better results for members and drive shareholder value,” he added.

Centene’s total offer of $78.57 a share was a 21% premium over Health Net’s closing price Wednesday. The stock closed Thursday at $71.55, up 10%.

But some analysts said a bidding war could now erupt. “We expect UnitedHealth could come in with a competing bid for either Health Net or Centene or both,” Ana Gupte of Leerink Partners told The Los Angeles Times.

As The Wall Street Journal reports, “Changes brought on in part by the Affordable Care Act have prompted major players in the health-insurance industry to consider mergers that could help them cut costs and reap other benefits.”

Potential acquisitions reported recently include UnitedHealth of Aetna, Anthem of Cigna, and Aetna of Humana.

“Centene is the largest Medicaid managed-care company, but has only minor market share in California where Health Net has been rapidly growing in Medicaid,” said Peter Costa, a senior healthcare analyst at Wells Fargo. “It is now clear that Centene and Health Net do not desire to be left out of the consolidation wave.”

California’s Medicaid program, known as Medi-Cal, is the nation’s largest with 12.2 million people enrolled. Almost one in three Californians now get coverage through the state’s insurance program for the poor.

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