Third Point Wants Centene to Explore Sale -- WSJ
May 25 2019 - 03:02AM
Dow Jones News
By Cara Lombardo
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (May 25, 2019).
Daniel Loeb's Third Point LLC has built a stake in Centene Corp.
and wants the health insurer to consider selling itself before
spending $15.3 billion on its deal to purchase WellCare Health
Plans Inc., according to people familiar with the matter.
While it isn't clear exactly how big Third Point's stake is, it
owns at least $300 million in Centene shares, one of the people
said. And with derivatives, the hedge fund could have significantly
more exposure to Centene's stock-price movement. Centene's market
value is roughly $22.8 billion.
Other activist investors including Corvex Management LP and
Sachem Head Capital Management have also built stakes in Centene,
according to other people familiar with the matter. Corvex and
Sachem Head believe Centene might not have considered all
alternatives, such as a sale to Humana Inc., before agreeing to buy
WellCare, these people said. But Third Point is one of the largest
and most closely watched activist hedge funds, and its involvement
could hold more sway with Centene shareholders.
Centene agreed to buy WellCare in March in a cash-and-stock deal
that amounted to roughly a 32% premium to WellCare's stock price
before the deal was announced.
The activists would like Centene to sound out any potential
buyers for the company, but they aren't necessarily planning to
solicit votes against the WellCare deal, the people said.
Centene said in a statement that its board considers any and all
M&A alternatives and believes the WellCare deal is in the best
interest of shareholders and will increase growth and
profitability.
Centene stock is up 3.7% since the deal was announced, including
a 2.6% jump Friday after The Wall Street Journal reported Third
Point's stake.
Centene is the largest provider of plans through the Affordable
Care Act's marketplaces, and a deal with WellCare would increase
substantially its lead as the biggest player in Medicaid managed
care while advancing efforts to expand in the Medicare Advantage
sector.
Humana, which has a strong Medicare business and has said it is
interested in growth in Medicaid, has long been viewed by investors
as a potential buyer of Centene. When an analyst asked Humana CFO
Brian Kane what the company thinks of the idea at a conference last
week, Mr. Kane declined to comment on Centene specifically but said
Humana would need to be able to "engage collaboratively" with the
other party for any significant deal to work. Some viewed that as
evidence that Centene might not be receptive to an approach from
Humana.
Managed-care analysts have been skeptical that Humana would
mount a hostile bid for Centene. In a proxy document released by
Centene in connection with the WellCare deal, the company said it
had "various preliminary conversations with representatives of
other companies in the managed-care industry" about potential deals
or partnerships but didn't mention specific offers.
Centene has long been led by CEO Michael Neidorff, who is seen
as having built up the company from a relatively small player to a
dominant force in government managed care. Mr. Neidorff has himself
been an aggressive acquirer, buying increasingly large companies to
expand Centene's geographic reach and bolster its lines of
business.
In February, Centene announced it had extended the contract of
Mr. Neidorff, who is chairman as well as chief executive, to 2023.
He was also set to remain executive chairman until 2024.
Centene and WellCare shareholders are set to vote on their
tie-up June 24. Only Centene shareholders who held shares as of May
8 can vote. Third Point bought the bulk of its position after that
date, the people familiar said.
The hedge fund in recent days filed for antitrust clearance,
some of the people said, which is necessary if the firm wants to
increase its stake and get involved with business decisions at
Centene.
Third Point, which has roughly $15 billion under management, is
known for taking large positions in companies such as Campbell Soup
Co. and Nestle SA and publicly agitating for change.
--Anna Wilde Mathews contributed to this article.
Write to Cara Lombardo at cara.lombardo@wsj.com
(END) Dow Jones Newswires
May 25, 2019 02:47 ET (06:47 GMT)
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