TAMPA — Centene Corp. of St. Louis and Tampa-based WellCare Health Plans said Wednesday they’ve finished running the obstacle course of regulatory approvals they need to close their $17.3 billion sale of WellCare to Centene.
As a result, the merger is expected to close on Thursday.
“We are pleased to achieve this milestone and look forward to closing our acquisition of WellCare and providing more members and communities access to high-quality health care,” Centene chairman, president and chief executive officer Michael F. Neidorff said in an announcement.
WellCare is No. 155 on the Fortune 500, with $20.4 billion in annual revenue and 13,000 employees nationwide. In Tampa, it has a staff of 4,500, many working in well-paying jobs as nurses, physicians or information technology professionals. Its total stock market value of more than $17 billion makes it, for one more day, at least, the largest publicly traded company by value based in the Tampa Bay area.
With a headquarters about three miles north of Tampa International Airport, WellCare has built a business managing health care for about 5.5 million patients with Medicaid, Medicare Advantage or Medicare prescription drug plans. More than 3.9 million of those patients are covered by Medicaid, the federal health plan for the poor, and most live in eight states: Florida, Illinois, Michigan, Georgia, Kentucky, Missouri, Arizona and New York.
Merging with Centene, which is No. 51 on the Fortune 500, is expected to create a muscular and far-reaching medical provider in Medicare, Medicaid and the Affordable Care Act’s health insurance marketplaces, with about 22 million members across all 50 states. It has been projected to have more than 12 million Medicaid members and about 5 million Medicare members, including the Medicare prescription drug plan. It has projected $97 billion in annual revenues, with 65 percent of the revenues coming from Medicaid and 15 percent each from Medicare and Obamacare.
Centene announced last year that WellCare chief executive officer Ken Burdick and WellCare chief financial officer Drew Asher would join Centene’s leadership team after the merger, reporting directly to Neidorff. Burdick will have a two-year employment agreement, according to Centene.
A WellCare spokeswoman said when the merger was announced that following the sale WellCare would continue to operate in a business as usual capacity.
“We have been working diligently on the integration plans to bring our organizations together so that it is seamless for members, providers and employees of both companies,” Neidorff said.
The companies announced plans for the merger 10 months ago. They have since been gathering regulatory approvals from the states where they do business as well as from the Justice Department, where the American Hospital Association urged an investigation of a corporate combination that it said threatened “to reduce competition in delivery of Medicaid managed care and Medicare Advantage services to tens of millions of consumers across broad swaths of the country.”
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Along the way, WellCare stockholder Garrett Seabaugh of North Dakota also challenged the merger in Hillsborough Circuit Court. His suit claimed that that WellCare executives rushed the sale through, undervalued WellCare’s stock and did not build any protections into the deal to prevent WellCare shareholders if there was a drop in the price of the Centene shares they would receive in exchange for their WellCare shares. Seabaugh dropped the suit last October, according to court records.
Since the sale was announced, shares of WellCare have risen from $231 the day before the deal was announced to $343 per share on Wednesday. During the same time, Centene’s stock has gone from about $55 to $66 a share.
Under the terms of the deal, Centene is paying nearly $15.3 billion in cash and stock for WellCare, as well as taking on WellCare debt that pushes the total value of the transaction to $17.3 billion. WellCare shareholders are to receive 3.38 shares of Centene stock, plus $120 in cash, for each share of WellCare stock they hold. Once the deal closes, Centene shareholders will own about 71 percent of the combined company, with WellCare shareholders owning approximately 29 percent.
Thursday’s closing will draw the curtain on WellCare’s short but eventful history as one of the Tampa Bay area’s most successful homegrown companies.
WellCare was founded in 1985 by a small group of local doctors and owned in the 1990s by well-known cardiologist, entrepreneur and philanthropist Dr. Kiran Patel. He sold it in 2002 to a New York investment group headed by Todd Farha and financier George Soros. It went public in 2004.
In 2007, more than 200 agents from the FBI and other agencies raided WellCare’s Tampa headquarters, kicking off a six-year investigation into how the company handled state and federal money earmarked to pay for behavioral care for the poor. Farha, the CEO at the time, and two other executives were found guilty of health care fraud. The company paid $227.5 million to settle cases brought by state and federal agencies.
Burdick joined the company in 2014 and worked to grow WellCare through a series of strategic acquisitions, including a $2.5 billion purchase of Meridian Health Plans in the Midwest and WellCare’s takeover of Aetna’s Medicare Part D prescription drug plan.