Centene mulls divestiture of $2B international business as part of value creation effort

As part of its ongoing examination of its portfolio, Centene Corporation is "evaluating strategic alternatives" for its businesses abroad.

During its investor day (PDF) late last week, Centene said it is eyeing two of its international businesses as divestiture targets, with the two worth more than $2 billion in annual revenue. Circle Health is the largest operator of independent hospitals in the U.K., including 50 hospitals and 1,900 beds. It accounts for two-thirds of Centene's international business revenue.

And Ribera, which is based in Spain, services both government programs and private pay patients, Centene said. It includes 10 hospitals with 1,650 beds as well as 71 primary care and outpatient clinics.

"The three major pillars of the Value Creation Plan include SG&A savings, gross margin improvement and strategic capital allocation," Centene said in a release. "In conjunction with the Value Creation Plan, Centene is reviewing its non-core assets as part of its ongoing portfolio optimization processes, including evaluating strategic alternatives for its international business."

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Centene has discussed its ongoing Value Creation Plan for several quarters as part of its earnings and has named strategic divestitures as a key part of the discussion under that plan. 

In the presentation, the company laid out its framework for evaluating its business lines. Key questions include "Are we the best owner?" and "Should it be independently owned and operated?" Centene is also measuring its businesses against its own strategic goals and investment targets and considering which fit the best into those areas.

Ultimately, the idea is to identify the business that are non-core, according to the presentation.

As part of this effort, Centene said it is targeting 2024 earnings per share of between $7.50 and $7.75. The midpoint represents a 50% increase from its full year 2021 guidance.

During the investor day, Centene said it expects between $135.9 billion and $137.9 billion in revenue for 2022 and earnings per share of between $5.30 and $5.50.