Molina Healthcare, Inc. (NYSE:MOH)’s acquisition of Bright Health assets is a positive for the company according to analysts at UBS, who said the deal could bring Molina closer to its long-term premium target.
The multi-state health insurance provider is acquiring Bright Health’s California Medicare Advantage (MA) Business, Brand New Day, and Central Health Plan.
The deal, valued at $510 million in tax benefits, is expected to close in the first quarter of 2024.
The UBS analysts wrote in a note to clients that the assets being acquired by Molina currently offer Medicare Advantage Prescription Drug (MAPD), Dual-Eligible Special Needs Plan (D-SNP), and Chronic-Condition Special Needs Plan (C-SNP) products in 23 counties in California, with a 60% overlap with MOH's Medicaid footprint.
They estimated that the 125,000 MA members acquired from Bright Health would add about $1.8 billion in premiums for Molina.
“This deal adds a significant piece in helping bridge to MOH's $46 billion premium target for 2026,” the analysts wrote.
“The purchase price paid represents a price per member of about $4,000, which compares to an average of roughly $3,000 (includes deals for Medicaid members) for MOH's past eight deals and is the largest deal MOH has done since its $820 million deal in 2020 for Magellan Complete Care (price per member of about $4,000).”
They noted that at Molina’s investor day in May that the company said M&A would contribute about $4.5 billion to future premium growth, with this deal contributing about 40% of that total.
“We expect MOH to continue to be active in M&A moving forward and look for similar deals to health plan assets,” the analysts wrote.
They have a ‘Neutral’ rating on the stock with a US$310 price target, based on a 13x multiple of their earnings per share projection for the next 12 months. Molina Healthcare shares closed at $298.48 on Monday.
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