Health insurer Centene Corp. said on Monday it has agreed to buy Magellan Health Inc. in a $2.2 billion deal including debt, looking to build up its mental health services as more Americans struggle with COVID-19-related behavioral and anxiety issues.
Centene has offered $95 per share in cash, a 14.7% premium to the pharmacy benefits manager’s Thursday closing price.
Shares of Magellan Health, which also provides mental health services to patients with serious mental illness, autism and opioid and substance use, were up 13.1% at $93.70 on Monday afternoon on the Nasdaq.
The move by Centene to expand mental health support comes as more than two out of five Americans are struggling with mental or behavioral health issues associated with the pandemic, the company said.
“I was thinking about it long before the pandemic, the pandemic just emphasized it,” said Centene Chairman, President and Chief Executive Michael Neidorff.
Magellan’s divestiture of a business unit earlier this year that was similar to Centene’s was the catalyst that allowed a deal to move forward, Neidorff said.
Centene’s patients, after being diagnosed with a serious illness, such as cancer, would benefit from having increased access to mental health care, Neidorff added.
The deal will add 2 million pharmacy benefit members and 16 million medical pharmacy members to Centene’s portfolio, the company said.
It would also bring to Centene 18 million third-party customers of specialty health services, which includes physical medicine and rehabilitation to people with disabilities.
There has been a wave of healthcare industry consolidation in recent years between insurers and pharmacy benefit managers, driven by pressure from governments and large corporations to lower soaring medical costs.
Large deals include CVS Health Corp’s $69 billion acquisition of health insurer Aetna Inc and Cigna Corp’s $52 billion deal to buy PBM Express Scripts Holding Co.
Centene and Magellan Health expect to complete the transaction in the second half of 2021.
(Reporting by Manas Mishra and Dania Nadeem in Bengaluru and Rebecca Spalding in New York Editing by Arun Koyyur and Matthew Lewis)
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