Adds Strategically and Financially Attractive Assets to Portfolio
Enters Three New States,
Maintains Continuity of Care for Magellan Complete Care Members and Stability for
Magellan Complete Care is a managed care organization serving members in six states including
With the addition of MCC, Molina will serve more than 3.6 million members in government-sponsored healthcare programs in 18 states and will have 2020 pro-forma projected revenue of over
Molina believes that the acquisition of the MCC assets represents a strong strategic fit with its portfolio of core Medicaid, high-acuity, and duals businesses. It also creates new markets for growth opportunities in Medicare and Marketplace in an expanded Medicaid footprint. Finally, the addition of MLTSS lives will further strengthen Molina’s leadership and geographic breadth in the important MLTSS growth area.
“Acquiring MCC expands our geographic footprint in our core businesses of managed Medicaid, dual eligibles, and long-term services and supports,” said
Compelling Strategic and Financial Benefits
Attractive Geographic and Product Additions. The acquisition of MCC is highly complementary to Molina’s current business. The transaction adds the states of
Arizona, Massachusetts, and Virginiato Molina’s Medicaid portfolio. It expands Molina’s current footprint into New York Citywith a Managed Long Term Care product, adds Massachusettswith a fully integrated Medicare dual eligible product, and broadens Molina’s product offerings in Floridaand Wisconsin. The transaction also increases Molina’s Medicare presence and further supports Molina’s high acuity and duals strategy.
Significant Value Creation. The transaction is expected to add approximately
$3 billionof revenue by 2021 and presents an opportunity to significantly leverage Molina’s fixed cost base. The MCC portfolio of contracts is long-tenured and stable. Molina intends to apply its demonstrated performance improvement capabilities to MCC’s cost structure and operations to improve the operating margins of the acquired business to achieve Molina’s target margins. Molina’s strengths and capabilities will be critical to successfully serving new populations if a recession increases Medicaid membership.
- Portfolio Diversification and Enhancement. Opportunities to enhance and expand Molina’s portfolio in such a substantial and synergistic way occur infrequently. This highly complementary acquisition enables Molina to expand its geographic and product footprint quickly and efficiently, creating a broader portfolio that is less affected by state-specific RFP timing and cycles.
Strong Financial Profile. The net purchase price is approximately 30 percent of full year 2019 revenue. The all-cash acquisition of MCC is expected to be accretive by approximately
$0.50to $0.75cash earnings per diluted share in the first year of ownership and accretive by at least $1.75cash earnings per diluted share in the second year of ownership. The transaction is anticipated to deliver returns well in excess of Molina’s cost of capital.
The transaction is subject to federal and state regulatory approvals, and other customary closing conditions. In connection with this transaction, Magellan Health, Inc. has agreed to provide certain transition services following the closing. The transaction is expected to close in the first quarter of 2021.
Barclays acted as financial advisor, and
Conference Call Details
Management will discuss this transaction in its regularly scheduled first quarter 2020 earnings conference call and webcast at
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
This press release contains “forward-looking statements” regarding the proposed acquisition by Molina of the Magellan Complete Care line of business from Magellan Health. All forward-looking statements are based on current expectations that are subject to numerous risk factors that could cause actual results to differ materially. Such risk factors include, without limitation, risks related to the following:
- the possibility that the proposed transaction will not be completed on a timely basis or at all;
- the risk that regulatory or other approvals required for the proposed transaction may be delayed or not obtained, or are obtained subject to conditions that are not anticipated that could require the exertion of management's time and resources or otherwise have an adverse effect on Molina;
- the possibility that the transition services Magellan Health has agreed to provide to Molina following the closing of the proposed transaction are not provided in a timely or efficient manner or that certain necessary transition services are not provided at all;
- the possible attrition in MMC membership pending the completion of and following the closing of the proposed transaction;
- the risk that Molina is unable to successfully retain or integrate the employees and operations of MCC;
- the difficulty of maintaining MCC provider relations and managing potential medical cost increases resulting from unfavorable changes in contracting or re-contracting with providers;
- the disruption from the announcement, pendency, and/or completion of the proposed transaction, including potential adverse reactions or changes to business relationships with customers, employees, suppliers, or regulators, making it more difficult to maintain business and operational relationships;
- the risk that, following the closing of the proposed transaction, the combined company may not be able to effectively manage its expanded operations;
- the possibility that the expected synergies and value creation from the proposed transaction will not be realized, or will not be realized to the extent expected or within the expected time period;
- the exertion of management’s time and resources, and other expenses incurred and business changes required, in connection with complying with the undertakings in connection with any regulatory, governmental, or third-party consents or approvals for the proposed transaction;
- the risk that unexpected costs will be incurred in connection with the completion and/or integration of the proposed transaction or that the integration of MCC will be more difficult or time consuming than expected; and
- the uncertainty around the duration and breadth of the COVID-19 pandemic, and the ultimate impact thereof on the benefits Molina expects to realize from the proposed transaction, which impact Molina cannot reasonably estimate at this time.
Additional information regarding the risk factors to which Molina is subject is provided in greater detail in its periodic reports and filings with the