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Centene’s Fidelis Acquisition on Track to Achieve Synergy Targets

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Fidelis Care acquisition

On July 2, 2018, Centene (CNC) issued a press release announcing the completion of the acquisition of Fidelis Care, a leading government health plan in New York City, for a total consideration of about $3.75 billion.

According to Centene’s 2019 Financial Guidance and Investor meeting presentation, Fidelis Care was the largest plan and the only plan that offered government programs such as Medicaid, Child Health Plus, MA (Medicare Advantage), among others, across all 62 counties of New York State.

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Deal synergies

According to the fourth-quarter earnings conference call, at end of fiscal 2018, Centene was on track to realize the synergy targets of this deal. Centene expects EPS accretion in the high-single-digit percentage and low to mid-teens percentage in the first 12 months and the second full year after completion of the deal, respectively. The company is also estimating pre-tax net synergies worth $25 million and $100 million in the first 12 months and second full year, respectively, after deal completion. The company has projected Fidelis Care to annually add $12.0 billion in revenues and more than $550 million in adjusted EBITDA, including net synergies, to the combined company.

According to Centene’s 2019 financial guidance and investor meeting presentation, the acquisition of Fidelis Care added 4,400 employees and a network of more than 70,000 providers and 1,740,000 members to the combined company’s portfolio.

According to the company’s fourth-quarter earnings conference call, effective January 1, Centene managed to smoothly shift its Fidelis Care employees to its own HR system. The company has an annual turnover rate at or even lower than historical rates for Fidelis Care employees.

Fidelis Care and MA business

According to the company’s fourth-quarter earnings conference call, Centene expects a quarter-over-quarter decline in MA membership by 20,000 in the first quarter due to Centene’s focus on securing a four-star rating for its Fidelis Care MA plans. Subsequently, the company expects YoY flat revenue and membership performance for its MA business in fiscal 2019. Centene expects to have a four-star rating for its MA business by fiscal 2020.

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