Centene To Acquire Health Net In $6.8 Bln Deal

(RTTNews) - Healthcare plan provider Centene Corp. (CNC) Thursday said it agreed to acquire managed health care company Health Net, Inc. (HNT) in a cash and stock deal valued at about $6.8 billion, including assumed debt of about $500 million. The deal will add to earnings in the first year and will enable Centene to extend its competitiveness as one of the largest plans covering government-sponsored programs in the U.S.

"We are pleased to have reached this agreement with Health Net, which we believe will create value for both Centene and Health Net shareholders and will enhance our ability to serve our members and work with our providers and government partners," Centene's Chairman, President and CEO Michael Neidorff said.

The deal will create a diversified multi-national healthcare enterprise with more than ten million members across the U.S., with estimated 2015 pro forma premium and service revenues of about $37 billion.

It will also add Woodland Hills, California-based Health Net's high-quality Medicare platform to Centene's Medicaid programs to create one of the largest medicaid managed care organizations in the country, with a total of about six million Medicaid members.

The deal will see Health Net shareholders receiving 0.622 shares of Centene common stock and $28.25 in cash for each share of Health Net common stock held. This implies a total consideration of $78.57 per share, based on Centene's closing stock price of $80.90 on Wednesday.

The offer price also represents a premium of 20.7 percent over Health Net's closing stock price of $65.06 on Wednesday. Health Net is currently soaring nearly 18 percent in pre-market trading.

St. Louis, Missouri-based Centene intends to fund the cash portion of the consideration through a combination of existing cash on hand and debt financing. However, the deal is not contingent upon financing, with Wells Fargo, N.A. providing $2.7 billion of financing commitment.

The deal, unanimously approved by the Boards of Directors of both companies, is expected to close by early 2016. However, it is primarily subject to approval by Centene and Health Net shareholders.

The transaction is expected to close by early 2016. It is subject to approval by Centene and Health Net shareholders, approvals by relevant state insurance and healthcare regulators and other customary closing conditions.

The deal is expected to generate diluted earnings per share accretion of 10 percent and adjusted diluted earnings per share accretion of 20 percent in the first year following closing. It is also estimated to achieve up to $150 million in annual cost synergies by the second year following close, with 50 percent of that being achieved after year one following close.

Following the closure of the deal, Centene shareholders would own about 71 percent of the combined entity, with Health Net shareholders owning about 29 percent.

Neidorff will lead the combined company as Chairman, President and CEO, while Health Net's President and CEO Jay Gellert will assist to achieve a smooth transition. The combined company will be headquartered in St. Louis, Missouri, with operations throughout the country.

"Our successes complement Centene very well and will lead to better offerings in line with new consumer and payer demands. After closing, we will be a leading provider of managed health care services very much aligned with the future. We expect that Health Net associates will play a critical role in the future of the combined company," Gellert stated.

CNC closed Wednesday's regular trading session at $80.90, down $0.41 on a volume of 0.90 million shares, while HNT closed at $65.06, up $0.70 on a volume of 1.02 million shares.