Centene announced plans Thursday to sell its Magellan Specialty Health for greater than $600 million in money and stock to administrator Evolent Health.
The sale is an element of Centene’s ongoing efforts to jettison its non-health plan businesses.
Evolent can pay at the very least $400 million in money and about $200 million in stock for the specialty management service, in line with Centene. Depending on Magellan Specialty Health’s performance in 2023, Centene could receive one other $150 million in money and Evolent common stock in 2024. The insurer didn’t disclose how that performance can be measured.
Centene expects the transaction to shut in the primary half of 2023, and plans to make use of the sale proceeds to repurchase stock and reduce debt. Federal antitrust regulators must approve the deal. Centene doesn’t expect the sale to affect earnings within the yr following the deal’s close.
The corporate will proceed to make use of Magellan Specialty Health’s services after the deal closes. Evolent said it expects the five-year partnership to generate $20 million in adjusted earnings before interest, taxes and depreciation by the top of 2024. The administrator said Magellan Specialty Health will generate $250 million in revenue in 2023, and expects the acquisition to right away boost its earnings.
Centene said it can also expand its use of Evolent’s other oncology, specialty and end-of-life services.
The insurer acquired the specialty management service as a part of its $2.2 billion acquisition of parent Magellan Health in January. 4 months after the deal closed, Centene announced that it planned to divest Magellan Health’s pharmacy services to Prime Therapeutics, a pharmacy profit manager launched by Blue Cross and Blue Shield insurers. Now, the insurer is shedding Magellan’s specialty administrative services arm, which provides utilization management to insurers for radiology and musculoskeletal procedures, physical medicine and genetic testing services.
“The transaction is one other significant milestone in our ongoing portfolio review and value creation plan,” CEO Sarah London said in a news release. Centene didn’t immediately reply to an interview request.
The corporate initiated its value creation plan in November 2021 after its comparatively low margins attracted the eye of activist investor Politan Capital Management, which owns a $900 million stake within the insurer. Politan Capital Management has pushed Centene to overhaul its board of directors and sell subsidiaries.
The insurer on Thursday finalized the sale of its Spanish and central European businesses to French private hospital company Vivalto Santé. Centene didn’t disclose the sale prices.
Centene sold a majority stake in home health provider U.S. Medical Management to a bunch of personal equity firms for an undisclosed sum in November 2021. The corporate divested specialty pharmacy PANTHERx Rare to a bunch of personal equity firms in May. Centene said the combined sale of PANTHERx Rare and Magellan Health totaled $2.8 billion.
The insurer is within the means of shedding greater than half of its real estate footprint, which it expects will save $200 million annually starting next yr.