Beginning 05/06/19 and most recently on 05/28, Rumor Hound alerted a potential takeover of multi-national managed care organization Centene Corporation (NYSE: CNC; $56.23) by Humana (NYSE: HUM; $251.04) through both high reliability and popularity sources. Since 1H15, Humana has closed on 8 deals with an aggregate announced value of approx. $6.5B in cash. Kindred Healthcare has been the largest deal by value ($3.8B in 12/17) followed by Curo Health Services in 4/18 and Concentra in 3/15 valued at $1.4B and $1.0B, respectively. During the same timeframe and excluding WCG, Centene closed on 13 deals with an aggregate announced value of approx. $10.6B in cash.
Earlier this week, the Humana-Centene deal was touted in the media as potentially accretive to Humana while ascribing a 30% premium to Centene. This news follows increased flows into Centene from Third Point, Corvex Management, Sachem Head Capital Management, and other activist funds- where these positions suggest they advocate for this deal (HFs account for >10% of total shares outstanding). The combined entity would be a powerhouse in managed care. Over 60% of Humana’s revenues are generated through their retail segment that comprises sales form government program premiums, commercial health plans, and State-specific contracts. Centene would significantly bolster Humana’s presence in these spaces and allow the combined entity to generate durable revenue growth and pivot into a multi-faceted managed care firm.
Centene has healthy financials, with an enterprise value of $22.5B, EDITDA LTM of $2.2B, $7.5B short and LT debt, and a shareholder composition that is highly institutional (79% of outstanding). Comparatively, Humana's enterprise value of $28.8B, EBITDA LTM of $3.7B, and $6.7B short and LT debt.
Centene made other news this week from their pursuit of WellCare Health Plans (NYSE: WCG; $272.07) in an estimated $15B deal, which may close in 1H20 assuming requisite regulatory approvals are obtained. Combined, the company would cover 23 million lives through government-sponsored health-care programs such as Medicaid and Medicare. Given Centene’s prior experience in acquisitions- obtaining the regulatory approval for the WCG deal should not cause anxiety among investors. In 2016, Centene acquired Health Net through a deal valued at $6.8B.
About Centene Corporation
Centene Corporation, a Fortune 100 company, is a diversified, multi-national healthcare enterprise that provides a portfolio of services to government sponsored and commercial healthcare programs, focusing on under-insured and uninsured individuals. Many receive benefits provided under Medicaid, including the State Children's Health Insurance Program (CHIP), as well as Aged, Blind or Disabled (ABD), Foster Care and Long-Term Services and Supports (LTSS), in addition to other state-sponsored programs, Medicare (including the Medicare prescription drug benefit commonly known as "Part D"), dual eligible programs and programs with the U.S. Department of Defense. Centene also provides healthcare services to groups and individuals delivered through commercial health plans. Centene operates local health plans and offers a range of health insurance solutions. It also contracts with other healthcare and commercial organizations to provide specialty services including behavioral health management, care management software, correctional healthcare services, dental benefits management, commercial programs, home-based primary care services, life and health management, vision benefits management, pharmacy benefits management, specialty pharmacy and telehealth services.
Humana Inc. (NYSE: HUM) is committed to helping our millions of medical and specialty members achieve their best health. Our successful history in care delivery and health plan administration is helping us create a new kind of integrated care with the power to improve health and well-being and lower costs. Our efforts are leading to a better quality of life for people with Medicare, families, individuals, military service personnel, and communities at large. To accomplish that, we support physicians and other health care professionals as they work to deliver the right care in the right place for their patients, our members. Our range of clinical capabilities, resources and tools – such as in-home care, behavioral health, pharmacy services, data analytics and wellness solutions – combine to produce a simplified experience that makes health care easier to navigate and more effective. More information regarding Humana is available to investors via the Investor Relations page of the company’s web site at humana.com.