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Centene (CNC) Divests IlliniCare as Part of Merger Agreement

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Centene Corporation (CNC - Free Report) and CVS Health (CVS - Free Report) have inked a deal under which CVS Health will buy Medicaid and Medicare Advantage lines of business owned by Centene in Illinois. The financial terms of this transaction have been kept under wraps.

The divestiture of IlliniCare Health Plan is necessary for Centene to win approval for its WellCare Health Plans (WCG - Free Report) acquisition given business overlap in the region.

Centene had agreed to buy WellCare for $17.3 billion in March 2019. The merger will create a premier healthcare enterprise and a leader in Medicaid, Medicare and the Health Insurance Marketplace. The combined entity will have a wider scale and diversification with more than 12 million Medicaid and around 5 million Medicare members. In total, it will have around 22 million members across 50 U.S. states.

The pending transaction has already received approvals from insurance and health care departments from 26 states though it is still subject to state regulatory approvals and other conditions. The transaction is expected to be completed in the first half of 2020.

The divestiture of the IlliniCare Health plan is the latest development for Centene and the subsequent step in the process of completing the merger with Tampa-based WellCare.

The acquisition of IlliniCare will aid CVS as the latter competes with UnitedHealth Group, Humana and others in the Medicare Advantage business. Last year, it purchased Aetna, which gave it access to the latter’s health insurance business.

The latest buyout will provide CVS with an opportunity to expand its Medicaid and Medicare Advantage presence in Illinois.

Shares of this Zacks Rank #3 (Hold) company have rallied 39.1% quarter to date, outperforming the industry’s increase of 27.7%.

Stock to Consider

A better-ranked stock from the medical sector is Select Medical Holdings Corporation (SEM - Free Report) , which sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Select Medical Holdings operates critical illness recovery hospitals, rehabilitation hospitals, outpatient rehabilitation clinics, and occupational health centers in the United States. The company delivered positive surprise in three of the last four reported quarters, the average being 11.07%.

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