Centene introduced plans Thursday to promote its Magellan Specialty Well being for greater than $600 million in money and inventory to administrator Evolent Well being.
The sale is a part of Centene’s ongoing efforts to jettison its non-health plan companies.
Evolent can pay no less than $400 million in money and about $200 million in inventory for the specialty administration service, in line with Centene. Relying on Magellan Specialty Well being’s efficiency in 2023, Centene may obtain one other $150 million in money and Evolent widespread inventory in 2024. The insurer didn’t disclose how that efficiency can be measured.
Centene expects the transaction to shut within the first half of 2023, and plans to make use of the sale proceeds to repurchase inventory and scale back debt. Federal antitrust regulators should approve the deal. Centene doesn’t anticipate the sale to have an effect on earnings within the yr following the deal’s shut.
The corporate will proceed to make use of Magellan Specialty Well being’s providers after the deal closes. Evolent stated it expects the five-year partnership to generate $20 million in adjusted earnings earlier than curiosity, taxes and depreciation by the tip of 2024. The administrator stated Magellan Specialty Well being will generate $250 million in income in 2023, and expects the acquisition to instantly increase its earnings.
Centene stated it would additionally increase its use of Evolent’s different oncology, specialty and end-of-life providers.
The insurer acquired the specialty administration service as a part of its $2.2 billion acquisition of dad or mum Magellan Well being in January. 4 months after the deal closed, Centene introduced that it deliberate to divest Magellan Well being’s pharmacy providers to Prime Therapeutics, a pharmacy profit supervisor launched by Blue Cross and Blue Defend insurers. Now, the insurer is shedding Magellan’s specialty administrative providers arm, which supplies utilization administration to insurers for radiology and musculoskeletal procedures, bodily drugs and genetic testing providers.
“The transaction is one other vital milestone in our ongoing portfolio evaluation and worth creation plan,” CEO Sarah London stated in a information launch. Centene didn’t instantly reply to an interview request.
The corporate initiated its worth creation plan in November 2021 after its comparatively low margins attracted the eye of activist investor Politan Capital Administration, which owns a $900 million stake within the insurer. Politan Capital Administration has pushed Centene to overtake its board of administrators and promote subsidiaries.
The insurer on Thursday finalized the sale of its Spanish and central European companies to French non-public hospital firm Vivalto Santé. Centene didn’t disclose the sale costs.
Centene offered a majority stake in residence well being supplier U.S. Medical Administration to a gaggle of personal fairness corporations for an undisclosed sum in November 2021. The corporate divested specialty pharmacy PANTHERx Uncommon to a gaggle of personal fairness corporations in Could. Centene stated the mixed sale of PANTHERx Uncommon and Magellan Well being totaled $2.8 billion.
The insurer is within the strategy of shedding greater than half of its actual property footprint, which it expects will save $200 million yearly starting subsequent yr.