U.S. health insurer Centene confirmed on Wednesday that it would buy WellCare Health Plans in a cash-and-stock deal to bulk up its government-backed health-care business, valuing its smaller rival at $15.27 billion.
Reuters had reported on Tuesday that the companies were in advanced talks over a deal.
Shares of WellCare soared 17.6 percent to $272, while those of Centene fell about 7 percent in premarket trading.
The Trump administration has stepped up its assault on former President Barack Obama’s signature healthcare 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, Bernstein analyst Lance Wilkes said in a pre-deal note.
The deal, including debt, was valued at $17.3 billion. The offer of $305.39 per share represents a premium of about 32 percent 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 percent 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.