Molina Healthcare, Inc. MOH inked a deal to acquire substantially all the assets of Affinity Health Plan (Affinity) for around $380 million, net of expected tax benefits and inclusive of an amount representing the company’s target allocation of the required regulatory capital. The company intends to fund it with cash in hand. Subject to certain closing conditions, it expects the deal to close in the second quarter of 2021.
The same is expected to be immediately accretive to the company’s adjusted earnings per share.
Affinity is a Medicaid managed care organization that caters to several members in New York City, Westchester, Orange, Nassau, Suffolk and Rockland counties in New York. Affinity’s premium revenues for the trailing 12 months ending Jul 31, 2020 came in at $1.3 billion. It exited August with around 284,000 Medicaid members.
Rationale Behind the Deal
The move is a perfect fit for the insurance giant, which has been taking up several strategic initiatives to fuel growth. Molina Healthcare’s solvency position and operating abilities will likely allow the company to solidify the financial base of Affinity. The company in turn will be able to gain traction from Affinity’s membership and revenues.
It will also be able to strengthen its services in New York.
Molina Healthcare announced multiple deals in the past few months that it expects to contribute to its growth plans.
Other Growth Initiatives
Earlier this year, this health insurance giant entered into an agreement to acquire the Magellan Complete Care (MCC) line of business of Magellan Health, Inc. for a total deal value of $820 million. The transaction will serve more than 3.6 million members under government-sponsored healthcare programs across 18 states. With this addition, the company is expected to build a better portfolio and gain an enhanced geographic diversity, etc. This buyout is projected to provide $2.8 billion of revenues in 2021.
In July, it announced its plans to acquire Passport Health’s Medicaid and dual eligibles business lines.
All these initiatives poise the company well for the long haul.
Zacks Rank and Price Performance
Shares of this presently Zacks Rank #3 (Hold) company have gained 57% in a year’s time, outperforming its industry’s growth of 29.3%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The price performance looks stronger than other companies’ stock movements in the same space, such as Centene Corporation CNC, Anthem Inc. ANTM and Humana Inc. HUM, which have rallied 29.1%, 9.6% and 58.1%, respectively, in the same time frame.
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