Centene expanding with $2.2B deal for Magellan Health

Centene Corp.’s $2.2 billion deal to acquire Magellan Health, announced last week, would eventually create one of the nation’s largest behavioral health platforms with 41 million members, analysts say.

Magellan Health, a Phoenix-based behavioral health managed-care company, would expand Centene’s specialty drug management business, adding 2 million pharmacy benefit management members and 16 million medical pharmacy members to its portfolio.

In a separate announcement,

Magellan announced that it closed the sale of its Complete Care business, a managed-care organization serving members in six states, to Molina Healthcare for $820 million.

Last year, Centene beefed up its Medicare Advantage and Medicaid managed-care offerings through its $17 billion merger with WellCare Health Plans, creating one of the largest providers of government-sponsored health plans with roughly 22 million members. The Magellan acquisition will add another 5.5 million members to this business, according to Centene.

Dean Ungar, vice president and senior credit officer at Moody’s Investors Service, called the acquisition a good deal for Centene in the long run. In the short term, however, he said the deal will impact Centene’s credit rating.

In a research note, Jefferies analyst David Windley wrote that the transaction will only benefit Centene’s earnings per share after two years and $125 million in cost savings.

The acquisition is subject to regulatory approval, and Centene expects it to close in the second quarter of 2021. —