U.S. health insurer Centene (NYSE:CNC) confirmed on Wednesday that it would buy WellCare Health Plans (NYSE:WCG) in a cash-and-stock deal to bulk up its government-backed health-care business, valuing its smaller rival at $15.27 billion.
Various media reported on Tuesday that the companies were in advanced talks over a deal.
Analysts said the acquisition would likely reduce Centene's dependence on the Obamacare health-care exchanges and allow it to better compete against large rivals UnitedHealth and CVS Health.
The Trump administration took more swings of late on former President Barack Obama's signature health-care law, and earlier this week the Justice Department backed a federal judge's ruling that it violated the U.S. Constitution because it required people to buy health insurance.
The deal would allow Centene to grow its Medicaid business and save costs as well as expand into Medicare Advantage, which is currently a small segment for the company, according to one analyst.
The deal was valued at $17.3 billion. The offer of $305.39 per share represents a premium of about 32% to WellCare's closing price on Tuesday.
WellCare shareholders will get 3.38 shares of Centene common stock and $120 in cash for each WellCare share, taking their ownership to about 29% of the new company.
After the deal, Centene would have about 22 million members in the United States and would generate about $500 million of annual cost savings by the second year of the closing, the companies said in a statement.
Shares in Centene doffed $2.90, or 5.3%, to $51.95, while those for WellCare climbed $26.30, or 11.4%, to $257.58
