Centene Corporation will purchase rival insurer WellCare Health Plans in a deal valued at $17.3 billion, the companies announced early Wednesday.
The acquisition has been unanimously approved by both boards, according to the announcement. Should the deal be finalized, the joint company would include 22 million members across all 50 states and combined estimated revenue of $97 billion in 2019.
The deal will create one of the largest sponsors of government plans across the three main markets: Medicare, Medicaid and the Affordable Care Act exchanges, the insurers said on a call with investors Wednesday morning.
Post-merger, the joint company would be the nation's biggest sponsor of Medicaid managed care and exchange plans, and the fourth-largest payer in the private Medicare space, including Medicare Advantage, supplemental coverage and Part D plans.
The joint company would include 12.3 million Medicaid members, 4.8 million Medicare Advantage and Part D members and 1.5 million members in its ACA plans, according to the investor presentation. Centene and WellCare estimate that merging will create $500 million in cost synergies in the joint company's second year, bolstered by greater scale in the government business.
In 17 states, the joint company would offer insurance products in all three of those markets, according to the presentation.
"This transaction delivers compelling benefits to all of our stakeholders and is the next logical step in our growth strategy," Centene CEO Michael Neidorff said on the call.
Once the acquisition is finalized, Centene shareholders will own about 71% of the combined company, and WellCare shareholders will own the remaining 29%. Neidorff will lead the joint company, and WellCare CEO Ken Burdick and Chief Financial Officer Drew Asher will take on newly-created roles within the company as a result of the merger.
The joint company will have an 11 member board, with nine representatives from Centene and two from WellCare, the companies said on the investors call. It will be headquartered in St. Louis, where Centene is based, with "substantial operations" in Florida, WellCare's home base.
As WellCare weighed the merger, it became clear that combining would pay off as both companies share a community-based focus and a drive for innovation, Burdick said on the call.
"We believe WellCare is well positioned strategically with our local approach, high-touch integrated model," Burdick said. "Like us, Centene believes that this approach is vital to improved health outcomes for recipients."