Centene is buying WellCare in a cash and stock deal for $305.39 a share, the companies said. WellCare investors, for each share of the company owned, will get $120 in cash and 3.38 common shares of Centene.
The companies said that, together, they will have about 22 million members nationwide and about $97 billion in revenue in 2019 on a pro forma basis. Through the deal, Centene will be able to grow its Medicaid offerings, the companies said. WellCare also has a Medicare platform.
Two of WellCare’s board members will join the combined company’s board, which will have 11 members. Centene Chief Executive Michael Neidorff will still run Centene. WellCare CEO Ken Burdick and Chief Financial Officer Drew Asher will also join Centene.
Shares of WellCare rose 20% in premarket trading.
The deal will create a powerhouse in the business of managing government health programs.
After years of rapid growth, Centene was already the biggest player in Medicaid managed care, but the acquisition of WellCare will increase its lead substantially, while also advancing its efforts to expand in the Medicare Advantage sector. Centene is also the largest provider of plans through the Affordable Care Act’s marketplaces, as well as supplying coverage for members of the military and health care for prison populations.
Together, the companies would achieve substantial scale, an important goal, as the biggest health-insurance players have consolidated to form ever-larger conglomerates that bring together multiple different businesses, from pharmacy benefits to clinics and drugstores.
Centene, based in St. Louis, had revenue of $60.1 billion in 2018, with membership of around 14 million, while WellCare, of Tampa, Fla., had revenue of around $20.4 billion and around 5.5 million people enrolled.
Both have expanded rapidly, building up their reach through repeated acquisitions, with Centene recently taking over major New York plan Fidelis Care, and WellCare buying Medicare drug plan assets spun off by Aetna Inc. as part of its deal to be acquired by CVS Health Corp. The CEOs of both companies—Mr. Neidorff of Centene, who has built his firm into a national player, and Mr. Burdick of WellCare, who is seen as having turned around the company in recent years—are well-regarded by investors.
But the companies’ similar focus on government plans will also raise potential antitrust concerns in areas where they overlap, principally in Medicaid. Centene had around 8.4 million Medicaid enrollees at the end of last year, while WellCare had 3.9 million. Among the states where the two companies have the biggest combined Medicaid market share are Florida, Georgia, Missouri and Illinois, according to an analysis by Jefferies.
Because of their focus on government business, both companies also face challenges tied to the political and legal environment. In particular, the Trump administration recently asked a court to invalidate the entire ACA, the law that created the marketplace business that is a key line for Centene, as well as an expansion of Medicaid. Some Democrats’ recent focus on creating a universal government health plan has also weighed on the shares of health insurers.