Long Beach, Calif.-based health insurer Molina Healthcare said Thursday it has agreed to buy Magellan Health's insurance business for $820 million in cash, net of certain tax benefits.
The deal allows Molina to expand its footprints to new states while adding about 155,000 members to its insurance rolls. The addition of the business, Magellan Complete Care, will boost Molina's annual revenue to more than $20 billion, Molina said.
The companies expect the deal to close by the end of the first quarter of 2021.
"Acquiring MCC expands our geographic footprint in our core businesses of managed Medicaid, dual eligibles, and long-term services and supports," Molina CEO Joe Zubretsky said in a statement. "We believe it will allow us to scale our enterprise-wide platforms and benefit from both operating and fixed cost leverage."
Magellan Complete Care serves Medicaid and Medicare members in six states, including Arizona, Florida, Massachusetts, New York, Virginia and Wisconsin. It recorded nearly $2.8 billion in revenue and $33 million in profit in 2019. Arizona, Massachusetts, and Virginia are new states for Molina.
Phoenix-based Magellan has been investing in improving the profitability of its insurance business. But the sale "eliminates the risk of Magellan's ability to execute on its MCC profitability improvement initiatives and allows the leadership team to focus on the remaining businesses," CEO Ken Fasola said in a separate news release.
Its remaining businesses focus on behavioral and specialty health and pharmacy benefit management services.
In its news release, Magellan pegged the purchase price of its insurance business at $850 million in cash. The company also said it entered additional commercial agreements to provide management and medical pharmacy services to Molina members, and its PBM will continue to serve Magellan Complete Care. It is also working with Molina to launch a behavioral health pilot program in Virginia.