Centene Corp. has agreed to acquire Magellan Health Inc. for $95 per share in cash for a total enterprise value of $2.2 billion.
The transaction, which was unanimously approved by the boards of directors of both companies, will allow Centene to establish a behavioral health platform across 41 million members to deliver health outcomes for complex, high-cost populations. Magellan Health will add to Centene's leadership in government sponsored healthcare, bringing 5.5 million new members on government-sponsored plans.
The deal will also add 2 million pharmacy benefit management members and 16 million medical pharmacy members, enhancing the scale of Centene's pharmacy platform. As part of Centene's Health Care Enterprises, Magellan Health will continue to independently support its existing customers and pursue growth opportunities.
Centene expects the transaction to be slightly accretive in the first full year and deliver low to mid-single digit percent adjusted EPS accretion from the transaction by the second full year, including about $50 million in annual net cost synergies projected by the second full year. The net synergies are in addition to the $75 million cost reduction plan already launched by Magellan Health.
Additionally, Magellan Health CEO Kenneth Fasola and other members of the leadership team have agreed to join Centene.
The transaction is expected to close in the second half, subject to clearance under the Hart-Scott Rodino Act, state regulatory approvals, the approval of the merger agreement by Magellan Health's stockholders and other customary closing conditions.
In connection with the deal, affiliates of Starboard Value LP, which own about 9.4% of Magellan Health's outstanding shares of common stock, have agreed to vote their shares in favor of the transaction at Magellan Health's special meeting.
Centene intends to primarily use debt financing to fund the cash portion of the acquisition, and J.P. Morgan has provided a $2.38 billion bridge financing commitment. Upon closing, Centene expects its debt-to-capital ratio to be in the low 40% range, and intends to use its earnings and cash flows to meet its debt-to-capital ratio target in the upper 30% range within 12 months to 18 months after completion.
Allen & Co. LLC, J.P. Morgan Securities LLC and Barclays are serving as financial advisers to Centene, while Skadden Arps Slate Meagher & Flom LLP is serving as legal counsel.
Goldman Sachs & Co. LLC and Guggenheim Securities LLC are serving as financial advisers to Magellan Health, while Weil Gotshal & Manges LLP is serving as legal counsel.
