Earlier this week,
) announced a definitive agreement to acquire Florida-based
Metropolitan Health Networks Inc.
) - a medical services organization. The purchase consideration
amounts to $850 million, excluding transaction costs.
Accordingly, Humana will pay in cash $11.25 per Metropolitan
Health share to the shareholders of the latter. Additionally, the
acquiring company will settle the outstanding debt of
Humana plans to finance the acquisition using its cash balance
along with borrowings. The company has adequate cash balance to
fund the deal. Humana exited the third quarter of 2012 with cash
and cash equivalents of $1.36 billion. Nevertheless, expenditure
and borrowing always weigh on company's financials and Humana is
The purchase is expected to be accretive to Humana's earnings
from the next year, thereby toning down the negative effect. The
acquisition is expected to culminate in the first quarter of 2013
if everything moves according to the plan.
The agreement has been approved by the board of both the
companies, but is yet to obtain the approval of Metropolitan
Health's shareholders. The deal is also subject to customary
Metropolitan Health has its headquarters in Boca Raton,
Florida. The company has a membership base of about 87,500. Thus,
it will marginally increase Humana's medical membership, which
stood at 12.02 million at the end of September 2012.
Additionally, the acquisition will add 35 state-of-the-art
primary care medical centers to Humana's primary care network.
The company's members will also gain access to Metropolitan
Health's affiliated physicians.
Following the announcement, rating agency A.M. Best & Co.
affirmed the financial strength ratings, issuer credit ratings
and debt ratings of Humana and its operating subsidiaries with a
stable outlook. Another rating agency Standard & Poor's
Rating Services revealed that the transaction will not affect its
ratings on Humana.
Concurrently, Humana also announced the acquisition of Certify
Data Systems - a company that facilitates exchange of health care
data between healthcare providers and patients. However, the
financial and other terms of the transaction were not divulged.
The company will now be operated as a subsidy of Humana.
Currently, the shares of Humana carry a Zacks #4 Rank,
implying a short-term Sell rating.
HUMANA INC NEW (HUM): Free Stock Analysis
METRO HLTH NET (MDF): Free Stock Analysis
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