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Molina Healthcare to Buy Subsidiaries of Providence Service

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Molina Healthcare, Inc. (MOH - Free Report) is one of those daring health maintenance organizations (“HMO”) that has enetered into a good many acquisition deals since the beginning of this year, amid innumerable changes in the health care space. The company’s announcement that it will acquire the remaining stake in two wholly owned subsidiaries of The Providence Service Corporation is its latest endeavor in this regard. These subsidiaries are Providence Human Services, LLC (“PHS”) and Providence Community Services, LLC (“PCS”).

The aggregate purchase consideration of the deal is $200 million. It is, however, subject to customary working capital adjustments. The acquisition is pending regulatory approvals and is slated to close in the fourth quarter of 2015.

Being one of the largest national providers of accessible, outcome based, behavioral and mental health services in the nation, PHS generates significant revenues. Notably, the company reported revenues of $346 million in 2014. The PHS and PSC platforms, along with their Medicaid expertise, are complementary to Molina Healthcare’s services and, hence, should make way for more revenue generation. As the company is focusing on arranging health care services for patients with complex requirements, PHS and PCS that deal with services related to behavioral and mental health, and social determinants of health, should be beneficial.

Molina Healthcare is on an acquisition spree. The company entered into an agreement to acquire some assets of the Medicaid and MIChild businesses of HealthPlus of Michigan and its subsidiary – HealthPlus Partners, Inc. – in May 2015. In a similar deal, Molina Healthcare of Florida, Inc., which is a wholly owned subsidiary of the company, inked a deal to acquire some assets of Preferred Medical Plan, Inc.’s Floridian Medicaid business in Jul 2015. In the same month, the company signed an agreement with MyCare Chicago to purchase some Medicaid business assets of the latter. Last month, Molina Healthcare entered a deal to buy the Medicaid assets of Integral Health Plan, Inc.

Molina Healthcare currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks from the HMO space are Aetna, Inc. (AET - Free Report) and Centene Corp. (CNC - Free Report) .  Both stocks hold a Zacks Rank #2 (Buy).

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