Medicare Advantage plan provider Healthspring (NYSE:HS) ticked up nearly 8.5% Friday on news it is buying private company Bravo Health for $545 million.
The merger will create the nation’s largest company that focuses exclusively on the Medicare Advantage population, according to HealthSpring CEO Herb Fritch.
Bravo Health operates Medicare Advantage coordinated care plans in the Mid-Atlantic region and Texas, as well as Medicare Part D stand-alone prescription drug plans in 43 states.
Its total Medicare Advantage and PDP membership was about 100,000 and 290,000, respectively, according to its August 2010 plan payment reports, and the company generated premium revenue of $832.8 million for the year’s first-half.
“This is the right next step for our company, and we are fortunate to be aligning ourselves with an organization that is so similar to ours,” Bravo Health CEO Jeff Folick said. “Our members, providers, and employees will all benefit from the combined size and efficiency of the new organization.”
The deal, expected to close by the end of the year, will be financed through the use of unrestricted cash and borrowings under an amended revolving credit facility and new term loan facilities that will be established along with the transaction’s close.
Nashville, TN-based HealthSpring said it expects costs related to the transaction to impact 2010 earnings by about 20 cents, though it said 2011 earnings should be boosted by the deal by 45 cents to 55 cents a share.
Shares of HealthSpring were up Friday about 8.59% to $19.97, on volume of 713,126, which is higher than average daily volume of 509,637 at 12:38 PM EST.
The deal is not subject to shareholder approval, though it does have to pass other customary conditions.