In a concerted effort to expand its footprint in the western
region of the United States,
WellCare Health Plans, Inc.
) penned a definitive agreement to buy Easy Choice Health Plan,
Inc. The deal, which is subject to regulatory clearance and other
closing conditions, is expected to consummate in the fourth quarter
this year. No other financial terms were disclosed.
The acquisition will help bolster WellCare's net income in the
coming year. Following the announcement, the shares of the company
gained 3.4% (or $1.96) over Thursday to close at $59.98
With the acquisition of Easy Choice, WellCare will
simultaneously take over around 34,000 Medicare Advantage plan
members in Los Angeles, Orange, Riverside and San Bernardino
Counties in Southern California, including approximately 12,000 of
its Medicare Advantage dual special needs plan (D-SNP) members in
Los Angeles County.
Moreover, Easy Choice is scheduled to expand its service area to
11 California counties, including the San Diego area, as well as
five counties in northern California in 2013. Also, it plans to
offer Medicare Advantage chronic condition special needs plans in
five of its 11 county service areas in the same year.
By 2013, WellCare expects to expand its Medicare Advantage
service area to more than 200 counties in 14 states, and offer
D-SNPs in most of these counties.
WellCare looks well poised for the upcoming quarters. With its
second quarter earnings release, it raised its guidance for 2012.
The company now expects its premium revenue to be $7.1 billion,
increasing from its previous outlook which ranged between an
approximate of $7.0 and $7.1 billion. We believe that such
acquisitions will help it attain the same.
Also, its closest competitor,
Coventry Health Care Inc.
) recently signed a definitive agreement to be acquired by U.S.
) for $7.3 billion. The deal is likely to be completed by mid 2013,
which implies that with fewer competitors, WellCare will enjoy a
dominant position in the market going forward.
Currently, the company carries a Zacks #3 Rank, implying a
short-term Hold rating.
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WELLCARE HEALTH (WCG): Free Stock Analysis
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