Centene is Buying Magellan Health in a Whopping $2.2 Billion Deal

Centene Corp, a multi-line managed care enterprise that serves as a major intermediary for both government-sponsored and privately insured health care programs, has agreed to buy Magellan Health Inc.

In an effort to expand more into mental-health care, Centene will be acquiring Magellan Health in a transaction valuing the target company at $2.2 billion.

As part of the deal, Centene will pay $95 a share in cash, according to a statement on Monday, or 15% above Magellan Health’s closing price on Thursday

The purchase will be primarily funded with debt, and JPMorgan Chase & Co. has provided a bridge financing commitment.

Shares of Magellan jumped as much as 12% while Centene gained as much as 1.2% on the news.

Centene is a top seller of government-sponsored health plans including Medicaid and Medicare while Magellan manages specialty care, including treatments for mental health and substance use disorders, for insurers and other customers.

“There is a critical need for a fundamentally better approach to supporting people with complex, chronic conditions through better integration of physical and mental health care” said Michael F. Neidorff, Centene’s chief executive officer. “This has become even more evident in light of the pandemic.”

Neidorff said in a recent interview that he envisions pairing behavioral and medical interventions together more seamlessly. He offered the example of when patient is newly diagnosed with diabetes or cancer, they might get referred to a psychologist as well.

“I want that family to have access to the psychological help they need to deal with it,” said Neidorff. “In the longer term, it reduces costs.”

The CEO said the deal will add slightly to Centene’s earnings in the first full year.
Magellan CEO Ken Fasola will stay on after the deal, and the unit will continue to operate independently within Centene after the transaction.

The deal is expected to close in the second half of 2021, the companies said.

Disclaimer: We have no position in any of the companies mentioned and have not been compensated for this article.