Item 1.01. Entry into a Material Definitive Agreement
Stock and Asset Purchase Agreement
On April 30, 2020, Magellan Health, Inc.,
a Delaware corporation (the “Company”) and Molina Healthcare, Inc. (“Molina”), entered into
a Stock and Asset Purchase Agreement (the “Purchase Agreement”) pursuant to which the Company has agreed to
sell its Magellan Complete Care business (the “MCC Business”) to Molina (the “Transaction”)
for $850,000,000 in cash, subject to certain adjustments, and Molina has agreed to assume liabilities of the MCC Business. The
following is a summary of the material terms of the Purchase Agreement.
The consummation of the Transaction is
subject to customary closing conditions, including: (i) the expiration of the waiting period applicable to the Purchase Agreement
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, (ii) the absence of any law or governmental order prohibiting
the Transaction, (iii) obtaining all required consents, authorizations, permits and approvals under Health Regulatory Laws (as
defined in the Purchase Agreement), (iv) no material adverse effect on the Company having occurred since the signing of the Purchase
Agreement, and (v) the accuracy of the representations and warranties of each party (subject to materiality qualifiers) in the
Purchase Agreement and the compliance by each party with its covenants in all material respects. The consummation of the Transaction
is not subject to any financing contingency.
The Purchase Agreement contains representations
and warranties and covenants customary for a transaction of this nature, including, with respect to the Company, covenants relating
to the conduct of the MCC Business from the date of the Purchase Agreement until the closing of the Transaction (the “Closing”).
The representations and warranties made by the Company are qualified by disclosures made in its disclosure schedules and certain
materiality thresholds. The representations and warranties generally survive for fifteen (15) months following the Closing, with
longer survival periods for certain representations and warranties. The parties have also agreed to indemnify each other for certain
losses arising from certain breaches of the Purchase Agreement and for certain other liabilities.
Under the Purchase Agreement, each of the
Company and Molina also has agreed to use its respective best efforts to take (or cause to be taken) all actions, and do (or cause
to be done) all things necessary, proper or advisable, under the Purchase Agreement and applicable laws to consummate and make
effective the Transaction; provided, however, that that in no event shall such actions (i) require the sale, divestiture,
license, hold separate, or other disposition of the businesses, assets, products or equity interests of the MCC Business, to the
extent such action would have resulted in more than a 15% reduction in the MCC Business’ revenues for the fiscal year ended
December 31, 2019, or (ii) (a) require the sale, divestiture, license, hold separate, or other disposition of the businesses, assets,
products or equity interests of Molina and its Subsidiaries, now owned or hereafter acquired (not including any businesses, assets,
products or equity interests of the MCC Business) or (b) otherwise result in a change or impairment to Molina’s business
to the extent, in the case of (a) or (b), any such action would be more than de minimis in nature to Molina (taken as a
whole).
The Purchase Agreement contains certain
termination rights for the Company and Molina, including, among other events, (i) mutual written agreement of the Company and Molina,
(ii) if the Closing has not occurred by the six (6) month anniversary of the date of the Purchase Agreement (subject to extension
if necessary to obtain applicable governmental approvals for up to a period of (90) days and for up to two (2) additional ninety
(90) day extensions if no material issues with the Transaction have been raised by the regulators), (iii) following a breach by
the other party that would cause a closing condition not to be satisfied and is not or cannot be cured within 30 days’ notice
of that breach or (iv) if there is any law, injunction or other judgment prohibiting the Transaction.
Pursuant to the Purchase Agreement, Molina
is required to provide the employees of the MCC Business with offers of employment, the terms and conditions of which shall include:
(i) salary and bonus opportunities that are no less favorable than those provided to such employees as of immediately prior to
Closing, and (ii) employee benefits that are substantially comparable in the aggregate to those provided to such employees as of
the signing of the Purchase Agreement. Prior to the Closing, the Company will institute a retention program with respect to mutually
selected employees of the MCC Business, and retention payments under such program will be made by Molina following the Closing;
provided, that half of Molina’s payment obligations will be credited to Molina in the calculation of the purchase
price adjustments as further detailed in the Purchase Agreement. The Purchase Agreement also contains certain covenants, including,
but not limited to customary restrictive covenants regarding the solicitation of employees and non-competition.
At the Closing, the Company and Molina
will enter into commercial agreements for certain behavioral health, utilization management and related services to be provided
by the Company to Molina and the MCC Business. In addition, the parties will enter into a transition services agreement pursuant
to which the Company and certain of its affiliates will provide, or cause third parties to provide, certain services to accommodate
the transition of the MCC Business to Molina.