Universal American's Stock Surges After $600 Million Buyout Deal With WellCare

By Tomi KilgoreMarketsMarketWatch Pulse

Universal American Corp.'s stock jumped 4.8% in light premarket trade Thursday, after the health benefits company said it agreed to be acquired by WellCare Health Plans Inc. in a deal valued at $600 million, or about $800 million including debt. As part of the agreement, WellCare will pay $10 in cash for each Universal American share outstanding, which represents a 12.5% premium to Wednesday's closing price of $8.89. The deal is expected to close in the second quarter of 2017. WellCare expects the acquisition to boost adjusted earnings per share by 60 cents to 70 cents in first year after closing. Synergies are expected to be $25 million to $30 million a year by 2019. "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," said WellCare Chief Executive Ken Burdick. WellCare's stock has soared 64% year to date through Wednesday, while Universal American shares have run up 27% and the S&P 500 has gained 6.5%.

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