WellCare Health Plans, Inc. recently announced completing its pending acquisition of Meridian Health Plan of Michigan, Inc., Meridian Health Plan of Illinois, Inc. and MeridianRx, together known as the Meridian. The transaction was effective Sep 1, 2018 and the deal was fixed at an approximate value of $2.5 billion.
On closing the buyout, Meridian now becomes a subsidiary of WellCare. The acquirer expects to enhance its Medicare Advantage platform in the markets as well as diversify the Medicaid membership by around 40 %. It is also expected that this much-awaited consolidation will add a proprietary PBM platform to the company’s portfolio and further fuel its integrated dual-eligible and Marketplace capabilities, which in turn, would definitely push growth in government-sponsored programs.
With both companies sharing commitment toward providing quality plans and counting on Meridian’s above 20-year enriched experience, the transaction should enable WellCare to leverage the best practices in healthcare service sector. Moreover, the buyout is expected to produce 40-50 cents of accretion to the company’s adjusted earnings per share in 2019 followed by 70-80 cents in 2020 and more than $1 of addition in 2021, consisting of $30-$40 million in synergies, which will eventually improve. However, it is exclusive of one-time transaction-related expenses of $75-$85 million and the cumulative integration-related costs of $50-$60 million.
This would even intensify the company’s constant focus on government-sponsored managed care services. Moreover, the deal is believed to bolster WellCare’s position in one of the fastest-growing markets within the managed care space. The combined Medicare Advantage would cover a total of 21 states as Michigan, Indiana and Ohio would be added to WellCare’s existing portfolio.
WellCare has substantially grown since 2013 through solid acquisitions and mergers. In 2017, it completed the purchase of Universal American Corp and Arizona Medicaid assets of Phoenix Health Plan. It is encouraging to know that the company is expecting to generate more than $4.3 billion in 2018 total revenues from Meridian’s businesses.
More and more companies are resorting to mergers and acquisitions activity for expanding their business in the medical industry. Recently, UnitedHealth Group Incorporated (UNH - Free Report) announced that its Optum segment is going to buy Sound Physicians along with a private equity firm. Notably, Anthem, Inc. (ANTM - Free Report) has already completed the integration of Aspire Health for improving the quality of its healthcare as well as enhancing capabilities. Earlier in the year, Humana Inc. (HUM - Free Report) along with private-equity partners bought Kindred Healthcare (KND) to extend into patientcare.
Shares of WellCare have soared 77.6%, outperforming its industry’s surge of 34.3%. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
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