Centene to sell Magellan Specialty Health to Evolent

Photo: Martin Barraud/Getty Images

Centene Corporation has announced that it has signed a definitive agreement to sell Magellan Specialty Health to Evolent Health.

Centene said it expects to receive over $750 million in aggregate proceeds, including potential earnout. It expects to receive approximately $600 million in proceeds at closing, with at least $400 million paid in cash and the remainder paid in Evolent common stock. In addition, Centene will receive up to $150 million in cash and Evolent common stock in 2024 if certain performance metrics are achieved. 

The majority of the net proceeds from the sale will be used to repurchase stock and the balance to reduce debt, according to Centene. The transaction is expected to close in the first half of 2023. It is expected to be neutral to Centene's Adjusted Earnings Per Share in the 12-month period post-closing.

WHY THIS MATTERS

Upon closing of the transaction, Centene and Evolent will launch a national multiyear strategic partnership in which Centene will continue and expand its relationship with Magellan Specialty Health. In addition, Centene will continue its ongoing expansion of Evolent's Oncology and End of Life Solutions, as well as evaluate other Evolent specialty solutions.

Magellan Specialty Health is a specialty benefit management organization that offers utilization management solutions to health plans, including radiology management, musculoskeletal management, physical medicine management and genetic testing solutions.

THE LARGER TREND

Centene acquired Magellan Specialty Health, also known as NIA, in January 2022 as part of its acquisition of Magellan Health. 

Centene provides government-sponsored and commercial healthcare programs, focusing on underinsured and uninsured individuals, including Medicaid and Medicare members, as well as individuals and families served by the Health Insurance Marketplace, people in the TRICARE program and individuals in correctional facilities.

In October, Centene announced increases in year-over-year profits, logging $738 million in profit in the third quarter of this year, up from $584 million a year ago. Total profit for the nine months ended September 30 were up to $1.4 billion, once again an increase over 2021, in which the insurer earned $748 million during the same period.

The financial performance was attributable to Medicare membership increasing by 22% and the news that it would be partnering with Express Scripts as its pharmacy benefit manager in 2024.

ON THE RECORD

"This transaction is another significant milestone in our ongoing portfolio review and value creation plan," said Sarah London, CEO of Centene. "Magellan Specialty Health has been a trusted partner of Centene and its health plans for more than a decade. By combining Magellan Specialty Health with Evolent, who is also a trusted partner, Centene will have access to a broad and integrated portfolio of value-based specialty solutions across Centene's geographies and lines of business."

Twitter: @SusanJMorse
Email the writer: SMorse@himss.org