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Molina Healthcare (MOH) Acquires Magellan Health's Unit

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Molina Healthcare, Inc. (MOH - Free Report) completed the pending acquisition of Magellan Health, Inc.’s (MGLN - Free Report) unit Magellan Complete Care (MCC) on Dec 31, 2020. The health insurer announced this deal in April last year. The transaction price was announced to be around $820 million, net of certain tax benefits.

As of Nov 30, 2020, MCC catered to around 200,000 members. As announced earlier, this deal will allow Molina to penetrate the three new states of Arizona, Massachusetts and Virginia as well as fortifying its foothold further in the New York City.

Magellan Complete Care is a managed care organization serving patients across six states including Arizona and Virginia.

Rationale Behind the Deal

Along with foraying into the new states, the addition of MCC to its portfolio will allow Molina to serve more than 3.6 million members in government-sponsored healthcare programs across 18 states.

This move is in line with the company’s strategy to boost its core Medicaid, high-acuity and duals businesses. It also provides new growth opportunities for the company in Medicare and Marketplace markets.

Moreover, the addition of MLTSS (Managed Long Term Services and Supports) lives will reinforce Molina’s leadership and geographical strength in the MLTSS growth regions.

The deal, undoubtedly, complements Molina’s current business and expands its footprint. It will allow the company to widen its product offerings in Florida and Wisconsin. It also boosts its Medicare presence in the areas.

As mentioned earlier, it is also expected to add around $3 billion of revenues by 2021. The all-cash MCC buyout is anticipated to be accretive by around 50-75 cents to the company’s earnings per share in the first year and by at least $1.75 to its earnings during the second year of the purchase.

The company also inked a deal to buy substantially all the assets of Affinity Health Plan, Inc. in September 2020. The same is expected to close as early as the second quarter of 2021. The acquisition could provide up to $600 million of revenues for the ongoing year. This takeover is expected to be immediately accretive to the company's adjusted EPS with 15-20 cents in the first 12 months. Molina also concluded the purchase of Passport Health Plan, Inc. in the same month.

All these initiatives poise the company well for growth.

Zacks Rank and Price Performance

Shares of this currently Zacks Rank #3 (Hold) company have soared 57.3% in a year's time compared with the industry's growth of 9%.

Other companies in the same space, such as Anthem, Inc. (ANTM - Free Report) and UnitedHealth Group Incorporated (UNH - Free Report) have also gained 6% and 20% each in the same time frame. Both companies presently carry a Zacks Rank of 3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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