Centene to buy smaller rival WellCare Health Plans in deal worth $17.3 billion

Major U.S. health insurer Centene will purchase government-sponsored health-care provider WellCare Health Plans in a cash and stock deal valued at $17.3 billion.

The transaction includes more than three shares of Centene stock and $120 in cash for each share of WellCare stock, or $305.39 per WellCare share, or about a 32 percent premium to WellCare’s Tuesday closing stock price.

Combined, the companies will have approximately 22 million members across all 50 states, according to a joint statement released Wednesday. The companies also said they expected to have pro forma 2019 revenue of approximately $97 billion.

The merger will allow Centene to expand its offerings of government-sponsored health-care programs, including Medicaid, and to increase its presence in Affordable Healthcare Act markets.

"With the addition of WellCare, we expect to bolster and diversify our product offerings, increase our scale and have access to new markets, which will in turn, enable us to continue investing in technology and better serve members with innovative programs designed to meet their needs," Centene's Chairman and CEO Michael Neidorff said in a statement.

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WellCare's market capitalization was about $11.6 billion at Tuesday's close. Shares of the company were up about 10 percent in midday trading.

Centene (CNC) shares were down about 7 percent.

Headquartered in St. Louis, Centene brought in about $60.1 billion in revenue in 2018. Meanwhile, WellCare is headquartered in Tampa and had a 2018 revenue of about $20.4 billion. The companies have memberships of around 14 million and 5.5 million, respectively. 

The transaction follows what has been thus far a busy year of mergers involving drugmakers, health-care insurers and pharmacies. The transaction, which has been unanimously approved by the boards of both companies, will be completed in the first half of 2020, according to the companies.

The deal creates one of the nation's largest insurers of government-funded health coverage just as President Trump is renewing his attack on the Affordable Care Act.

The administration attacked the ACA in court Monday, saying that former President Barack Obama’s health-care law should be declared unconstitutional after Congress repealed one part of it — unpopular fines on people who remain uninsured.

Several GOP-led states are challenging the ACA in a federal court case that may head to the Supreme Court, and the Justice Department filed a letter with a federal appeals court in New Orleans supporting their case.

The 2010 Affordable Care Act expanded coverage to millions of people by creating individual insurance exchanges and increasing Medicaid enrollment in several states.

The Wellcare deal could help Centene improve its profitability and protect against any risks that stem from threats to the ACA, SVB Leerink analyst Ana Gupte said in a research note.

Contributing: Associated Press

Follow USA TODAY intern Ben Tobin on Twitter: @TobinBen