Centene announced plans on Thursday to sell Magellan Specialty Health for more than $600 million in cash and stock to the manager of Evolent Health.
The sale is part of Centene’s ongoing efforts to phase out businesses that are not part of its health plan.
According to Centene, Evolent will pay at least $400 million in cash and about $200 million in stock for the special management service. Depending on Magellan Specialty Health’s performance in 2023, Centene could receive an additional $150 million in Evolent cash and common stock by 2024. The insurer did not disclose how that performance is measured.
Centene expects the transaction to close in the first half of 2023 and plans to use the proceeds to buy back shares and reduce debt. The federal antitrust regulator must approve the deal. Centene does not expect the sale to affect earnings in the year after the deal closes.
The Company will continue to use Magellan Specialty Health services after the agreement ends. Evolent said it expects the five-year partnership to generate $20 million in adjusted earnings before interest, taxes, and amortization by the end of 2024. Administrators say Magellan Specialty Health will generate revenue. revenue of $250 million by 2023 and expects the acquisition to immediately boost its earnings.
Centene said it will also expand use of Evolent’s oncology, specialty and other end-of-life services.
The insurer acquired specialty management services as part of its $2.2 billion acquisition of parent company Magellan Health in January. Four months after the deal closed, Centene announced that it plans to divest Magellan Health’s pharmaceutical services to Prime Therapeutics, a pharmaceutical benefit management company run by insurers Blue Cross and Blue Shield established. Now, the insurer is phasing out Magellan’s special administrative services arm, which provides use management services to insurers for radiological and musculoskeletal, medical, and radiological procedures. physical education and genetic testing services.
Chief Executive Officer Sarah London said in a press release: “This transaction is another major milestone in our ongoing portfolio review and value creation plan. Centene did not immediately respond to a request for an interview.
The company began its value creation plan in November 2021 after relatively low margins attracted the attention of active investor Politan Capital Management, which owns $900 million in shares in the company. insurance company. Politan Capital Management pushed Centene to overhaul its board and sell subsidiaries.
The insurer on Thursday completed the sale of businesses in Spain and Central Europe to French private hospital company Vivalto Santé. Centene did not disclose the selling price.
Centene sold a majority stake in home health care provider US Medical Management to a group of private equity firms for an undisclosed amount in November 2021. The company divested home. specialty drug PANTHERx Rare to a private equity group in May. Centene said total sales of PANTHERx Rare and Magellan Health totaled $2.8 billion.
The insurer is in the process of eliminating more than half of its real estate footprint, which it expects will save $200 million annually starting next year.
