|Universal American Corp., a publicly traded health care benefits company in White Plains that specializes in Medicare Advantage plans, will be acquired by WellCare Health Plans Inc. of Tampa in an all-cash deal with an equity value of about $600 million, the companies announced on Thursday.
In a deal expected to close in the second quarter of 2017, WellCare, a provider of government-sponsored managed care services, will pay $10 per share of Universal common stock. The share price represents a 34 percent premium to Universal American’s 60-day volume-weighted average closing stock price as of Nov. 16.
WellCare said it expects to retire Universal American’s outstanding preferred shares shortly after closing. With the merger, Universal American’s outstanding convertible notes will become convertible and holders will have the right to require their notes to be repurchased.
With Universal American’s preferred shares and convertible debt retired, the transaction would be worth approximately $800 million, according to the companies.
WellCare’s CEO Ken Burdick in the announcement said the acquisition is “a very good strategic fit for WellCare,” strengthening its business in two key markets, New York and Texas, and giving it a presence in Maine. WellCare serves approximately 3.8 million Medicare and Medicaid plan members nationwide.
The acquisition is expected to add approximately 65,000 Medicare Advantage members in the Houston-Beaumont area of Texas and about 14,000 members in the Northeast, primarily in New York. Universal American also partners with health care providers in Accountable Care Organizations in 11 states, six of which are WellCare Medicare Advantage markets.
In acquiring Universal American, Burdick said Well Care also plans “to leverage their core competency in physician engagement to strategically develop and grow value-based provider relationships.”
Universal American Chairman and CEO Richard A. Barasch said the deal demonstrated WellCare’s commitment to Universal’s trademarked collaborative model “in which we work closely with our physician partners to improve quality and lower costs for Medicare beneficiaries.”
WellCare said it expects annual synergies of approximately $25 million to $30 million by 2019 from the merger. The deal is expected to produce 60 cents to 70 cents of accretion to WellCare’s adjusted earnings per share in the first year after closing and 70 cents to 80 cents in the second year, excluding one-time transaction costs and integration costs.
The acquisition is subject to approvals by regulators and Universal American stockholders.
Universal American in 2011 sold its Medicare prescription-drug plan business to CVS Caremark for $1.25 billion. The company in 2012 paid $227.5 million to acquire APS Healthcare, a specialty health management and services company based in White Plains.
Universal American this summer closed on the sale of its Traditional Insurance business to Nassau Reinsurance Group Holdings LP for $30.5 million in cash and Nassau’s contribution of more than $20 million of new equity capital.