Aetna (NYSE: AET) and Humana (NYSE: HUM) remain undaunted by the pending litigation from the U.S. Department of Justice, challenging their proposed $37 billion merger. The two companies announced they would sell certain Medicare Advantage (MA) assets to Molina Healthcare (NYSE: MOH) for a total estimated $117 million in cash for both transactions. The price is based on the estimated number of members in the plans involved in the transactions. Of course, this deal hinges on the successful completion of Aetna’s acquisition of Humana, CMS approvals and actions, and the customary closing conditions, including state and other regulatory approvals.
If successful, Molina is expected to add approximately 290,000 MA members in 21 states, preserving the competition for senior citizens who choose to receive Medicare coverage through MA plans. The sale addresses a key concern of the Justice Department in its challenge to the Aetna/Humana hookup.
The MA plans involved include certain Aetna MA plans in Alabama, Arkansas, Florida, Georgia, Illinois, Louisana, North Carolina, Nevada, Ohio, Oklahoma, Texas, Virginia and West Virginia. Certain Humana plans in Delaware, Illinois, Iowa, Kansas, Missouri, Nebraska, Ohio, Pennsylvania, South Dakota and Utah. Aetna and Humana will continue to administer their respective plans for a transition period following the closing.
For Molina, the anticipated transactions will add greater program and geographic diversification within government-sponsored programs. The deals will also increase product offerings in existing states and expand the company’s Medicare footprint to new states.
Molina has been acquiring Medicaid assets in Florida, Illinois and Michigan, among others. In 2015, the company announced eight acquisitions with a combined total of $207.2 million. In April 2016, Molina paid $41.3 million for the Total Care Medicaid plan owned by Universal American Corp. (NYSE: UAM), in White Plains, New York.
The Aetna/Humana transaction gives the company a substantial boost into the fast-growing MA market. If these transactions do close, Molina expects them to be immediately accretive to earnings. That’s a big if.
| Target | Date | Price |
|---|---|---|
| Medicaid and MIChild contracts | May 15, 2015 | N/A |
| Medicaid assets of Preferred Medical Plan | July 14, 2015 | $8.2 million |
| Medicaid assets of MyCare Chicago | July 15, 2015 | $35 million |
| Medicaid business of Integral Quality Care | August 3, 2015 | $67 million |
| Medicaid business of Loyola Physician Partners | October 9, 2015 | $15 million |
| Medicaid business of Columbia United Providers | November 12, 2015 | $28 million |
| Medicaid and MIChild businesses of HAP Midwest Health Plan | November 24, 2015 | $36 million |
| Medicaid business of Better Health Network | November 30, 2015 | $18 million |