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WellCare to acquire Meridian for $2.5B in cash

WellCare Health Plans Inc. has agreed to acquire Meridian Health Plan of Michigan Inc., Meridian Health Plan of Illinois Inc. and pharmacy benefit manager MeridianRx for $2.5 billion in cash.

Meridian, a family-owned, family-operated group of health plans with offices in Michigan and Illinois, is projected to generate more than $4.3 billion in total revenue in 2018.

The transaction is expected to grow and strengthen WellCare's Medicaid and Medicare Advantage business. Through the transaction, WellCare will diversify its Medicaid portfolio through the addition of Michigan, deepen its Medicaid business in Illinois and acquire an integrated pharmacy benefit manager platform.

The transaction is expected to produce 40 cents to 50 cents of accretion to WellCare's adjusted EPS in 2019, 70 cents to 80 cents of accretion in 2020, and more than $1.00 of accretion in 2021, inclusive of $30 million to $40 million in synergies and exclusive of one-time transaction-related expenses of $75 million to $85 million and cumulative integration-related expenses of $50 million to $60 million.

WellCare expects to fund the transaction through a combination of cash on hand, its undrawn $1.0 billion revolving credit facility, new debt of $600 million to $1.0 billion and new equity of $800 million to $1.2 billion. The transaction is not contingent upon financing, and WellCare has secured $2.5 billion in committed bridge financing.

The transaction is anticipated to close by the end of 2018.