Humana Squashes Proposed Merger with Centene, WellCare
Humana broke with company policy to comment on M&A activity in order to shoot down the potential merger with Centene.
Source: Humana
By - In a rare move for the health payer, Humana has brought an end to the rumors of a merger with competitor Centene.
Humana broke with company policy to not comment on potential merger and acquisition matters to quell rumors of a possible merger with competitor Centene in a recent filing to the Securities and Exchange Commission. The Louisville-based company stated that it “will not make a proposal to combine with Centene as an alternative to Centene’s proposed transaction with WellCare Health Plans, Inc.” Apparently, the negative impact of speculation on the company’s stock was too much to ignore.
At the close of May, multiple reports noted activity on the part of Centene shareholders to counter Centene’s proposed $15-billion acquisition of WellCare Health Plan.
“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,” reported Forbes senior contributor Bruce Japsen. “But 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."
Last week, Japsen noted that Centene’s large presence in the health insurance exchanges created by the Affordable Care Act proved unattractive to Humana. Humana was only of several leading payers to exit the health insurance exchanges over the past few years. Merging with Centene would run counter to its current aspirations to grow its Medicaid and Medicare Advantage businesses.
Forbes ranks Humana in the top five of the country’s biggest health insurance companies in 2018, just ahead of Centene in membership and revenue, 14 million and $53.7 billion to 12.2 million and $48.3 billion. Combined, the two companies would still trail industry lead UnitedHealth Group (49.5 million members and $201 billion in revenue) by a significant margin.
Earlier this week, Josh Nathan-Kazis of Barron’s reported that Centene shareholders have not approved the WellCare acquisition, which still awaits approval from federal officials whom hospital associations have approached to voice antitrust reservations about the merger. The proposed merger is slated to be voted on during a meeting of Centene and WellCare shareholders on June 24. The deal is set to close during the first half of 2020.
According to Reuters, the combined Centene-WellCare entity will serve 22 million beneficiaries across the United States. “It would allow it to bulk up its government-backed Medicare and Medicaid businesses, while reducing exposure to Obamacare healthcare exchanges,” the outlet reported.
None of this has stalled Centene’s efforts to move forward with the acquisition.
“This is the right combination for our shareholders. WellCare is a well-run company. These are two great companies coming together in an important sector that would just create a better environment for everybody. It's the right move,” Centene CEO Michael Neidorff told Yahoo Finance.
As further proof of Centene’s approval of WellCare’s management, the former named two leaders from the latter to the new executive team responsible for the combined business.
WellCare CEO Ken Burdick and Executive Vice President and CFO Drew Asher will report directly to Neidorff.
"This is a transaction about growth and the success of the combined company,” Neidorff said in a public statement. Centene and WellCare each have extraordinary talent across all levels, and we look forward to leveraging the strengths of our combined organization to realize the benefits of this transaction for all of our stakeholders. We are pleased to be taking this important step in the journey to combine our two great companies."
