Metropolitan Health Networks will acquire Continucare for $416 million in cash and stock, in a deal that will create a combined entity providing care to more than 68,000 Medicare Advantage and Medicaid customers in 18 Florida counties.
The deal will expand Metropolitan's footprint in the Florida market to include Miami-Dade, Hillsborough and Broward counties. In all, the combined company will operate 31 primary care medical practices in the state and tap a contracted network of more than 250 independent primary practices.
"For many years Continucare and Metropolitan have each worked diligently in their respective regions throughout Florida to establish high quality and profitable primary care networks and operations that serve Medicare Advantage customers and, in the case of Continucare, Medicaid customers as well," said Michael Earley, chairman and CEO of Metropolitan Health, in a statement. "Each of our organizations have independently cultivated businesses that have little overlap and provide exemplary primary care to seniors and others in one of Florida's fastest growing industries. Continucare is viewed as an accretive and a highly complementary acquisition for Metropolitan, one that we would be proud to culminate."
[See also: Florida pushes forward with plan to shift Medicaid to managed care; Obama, GOP at odds over Medicare's future]
The move also helps position Metropolitan to serve an increasing number of Baby Boomers coming eligible for Medicare, a surge of Medicaid patients expected under health reform and the switch in Florida to a managed care system for all Medicaid patients.
"The pairing of Continucare with Metropolitan represents an attractive platform to address not only the growing seniors market in Florida, but the potential for out-of-state expansion as well," Early added. "Additionally, with Florida Medicaid soon to be under the managed care umbrella, the potential for growth expands even more. Together the companies have the size and scale required to address these markets most efficiently, and we expect that there will be significant employment growth opportunities under the Metropolitan operational model."
Under the terms of the deal, which the companies anticipate will close by the end of the third quarter, Continucare stockholders will receive $6.25 cash and a .0414 share of Metropolitan stock. Continucare's stock spiked more than 30 percent to meet the offer price, closing at $6.24 per share at the close of Monday's trading. Metropolitan's shares dipped 2.5 percent, to $4.72 per share.
According to Metropolitan, the company expects to achieve moderate operational savings through the elimination of certain of Continucare's public company expenses, as well as the elimination of some executive leadership positions. Aside from those changes, it is anticipated that the Continucare operational staff and employees will remain virtually intact.
Continucare's CEO Richard Pfenninger, Jr., will exit the company once the deal closes, while CFO Fernando Fernandez will stay with the new company to help it through the transition.