WellCare Health Plans (WCG) to Acquire Universal American (UAM) for $10/Share

November 17, 2016 7:16 AM EST
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WellCare Health Plans, Inc. (NYSE: WCG) and Universal American Corp. (NYSE: UAM) announced today that they have entered into a definitive agreement under which WellCare will acquire Universal American in an all cash transaction valued at $10.00 per share of common stock. This represents a 34 percent premium to Universal American's 60-day volume-weighted average closing stock price as of November 16, 2016.

WellCare expects to retire Universal American's outstanding preferred shares shortly after closing and, in connection with the merger, Universal American's outstanding convertible notes will become convertible and holders will have the right to require their convertible notes to be repurchased. The proposed price for Universal American's common shares implies an equity value of approximately $600 million. With the retirement of Universal American's preferred shares and its convertible debt, the transaction would be valued at approximately $800 million. The transaction was approved by the board of directors of WellCare and Universal American. The transaction is expected to be funded through available cash on hand and is expected to close in the second quarter of 2017.

"We are pleased to announce this agreement with Universal American. Their focus on Medicare Advantage makes this transaction a very good strategic fit for WellCare," said Ken Burdick, WellCare's CEO. "With approximately 114,000 Medicare Advantage members, and nearly 70 percent enrolled in a 4.0 or higher Star Rating plan, the transaction strengthens WellCare's Medicare Advantage business in two key local markets - New York and Texas - and gives us a Medicare Advantage presence in Maine. In addition, we intend to leverage their core competency in physician engagement to strategically develop and grow value-based provider relationships."

"Everyone associated with Universal American has worked tirelessly to bring vibrancy to the Healthy Collaboration® model in which we work closely with our physician partners to improve quality and lower costs for Medicare beneficiaries," said Richard A. Barasch, Universal American's Chairman and CEO. "Through this acquisition, WellCare is demonstrating its commitment to this model."

The acquisition is expected to add approximately 65,000 Medicare Advantage (MA) members in a 4.5-Star plan in Houston-Beaumont, Texas and approximately 14,000 MA members in a 4.0-Star plan in the Northeast, primarily in New York, to WellCare's Medicare Health Plans membership. In addition, Universal American partners with Accountable Care Organizations (ACO) in 11 states, six of which are WellCare Medicare Advantage markets.

Under the terms of the agreement, Universal American stockholders will receive $10.00 in cash for each share of Universal American common stock. WellCare expects annual synergies of approximately $25 million to $30 million by 2019. The transaction is currently expected to produce $0.60 to $0.70 of accretion to WellCare's adjusted earnings per share in the first year after closing and $0.70 to $0.80 of accretion in the second year after closing, excluding one-time transaction costs and integration costs. The transaction is subject to approval by Universal American's stockholders and other customary closing conditions, including regulatory approvals.

BofA Merrill Lynch is acting as financial advisor to WellCare. Kirkland & Ellis LLP and Bass, Berry & Sims PLC are acting as legal advisers to WellCare. MTS Health Partners, LP is acting as financial advisor to Universal American. Paul, Weiss, Rifkind, Wharton & Garrison LLP is acting as legal advisor to Universal American.

WellCare's presentation describing the highlights of the transaction can be accessed via the following link: http://ir.wellcare.com/presentations.



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