HealthSpring, Inc. announced Friday that it will pay $545 million to purchase Bravo Health, Inc., a privately held operator of Medicare Advantage plans in Pennsylvania, the Mid-Atlantic region, and Texas, and Medicare Part D stand-alone prescription drug plans in 43 states.
The deal creates the largest company in the nation focused solely on the Medicare Advantage population, including the seventh-largest Medicare Advantage plan, and the ninth-largest stand-alone prescription drug plan.
Bravo Health's August 2010 plan payment reports reflected aggregate Medicare Advantage and PDP membership of over 100,000 and 290,000, respectively. For the first six months of 2010, Bravo Health generated premium revenue of approximately $832.8 million.
"I cannot think of a better way to demonstrate our commitment to Medicare Advantage and our confidence in the long-term future of the program than the transaction we are announcing today, said Herb Fritch, chairman/CEO of Nashville-based HealthSpring. "This acquisition will extend HealthSpring's reach into new geographies, including an immediate and sizable presence in the Philadelphia market. With diversified geography and increased membership scale, the combined companies will be even better positioned in the new environment created by health insurance reform."
Jeff Folick, CEO/chairman of Baltimore-based Bravo Health, called the acquisition "the right next step for our company, and we are fortunate to be aligning ourselves with an organization that is so similar to ours."
HealthSpring already owns and operates Medicare Advantage plans in Alabama, Florida, Georgia, Illinois, Mississippi, Tennessee, and Texas and also has a national stand-alone Medicare prescription drug plan.
The deal will be financed with unrestricted cash and borrowings under an amended revolving credit facility and new term loan facilities that will be established simultaneously with the closing of the transaction. HealthSpring has entered into a $750 million financing commitment with JPMorgan Chase Bank, N.A.; Bank of America Merrill Lynch; and Raymond James Bank, FSB. The commitment consists of an amendment to HealthSpring's existing $350 million credit facility combined with $400 million of new loans.
The deal is expected to close by the end of the year and should add $.45 to $.55 to HealthSpring's 2011 earnings per share. HealthSpring expects that transaction expenses, including financing commitment, financial advisory, and other fees, will impact 2010 earnings by about $.20. The transaction does not need HealthSpring stockholders' approval, but is subject to federal and state regulatory approvals.
John Commins is the news editor for HealthLeaders.