NEW YORK (Reuters) – U.S. health insurer Centene Corp is in advanced talks to buy smaller rival WellCare Health Plans Inc, according to two people familiar with the matter, a move that would create a bigger player focused on government-backed health insurance plans.
If negotiations are successful, a deal could come as soon as early April, the people said. Terms of a deal could not be learned immediately. WellCare’s market capitalization was about $11.6 billion at Tuesday’s close.
The talks were first reported by Bloomberg, and WellCare’s shares rose 11 percent in after-the-bell trading.
Shares of both companies fell earlier in the day after President Donald Trump’s administration stepped up its attack on the Affordable Care Act, popularly known as Obamacare, by telling a federal appeals court it believes the healthcare law is unconstitutional and should be struck down.
A deal for WellCare would help reduce Centene’s dependence on attracting members from Obamacare’s healthcare exchanges and help it compete better against larger rivals UnitedHealth Group Inc and CVS Health Corp.
SVB Leerink analyst Ana Gupte said the Obamacare program accounted for about 40 percent of Centene’s earnings, while it is only in the low-teen percentages of WellCare’s earnings. WellCare is more focused on Medicare and Medicaid plans, government healthcare programs for the elderly and poor.
The companies also could see some cost savings in states where they both operate, such as Florida, Georgia, Illinois and Missouri.
In regular trade on the New York Stock Exchange on Tuesday, WellCare shares closed down around 3.9 percent at $231.27 and Centene shares also fell 3.9 percent, to $54.85.
Reporting by Greg Roumeliotis; Additional reporting by Liana B. Baker; Writing by Michael Erman; Editing by Leslie Adler and Peter Cooney