Humana Completes Acquisition of Metropolitan Health Networks, Inc.
22 December 2012 - 8:10AM
Business Wire
Humana Inc. (NYSE: HUM) today announced that it has completed
its previously announced acquisition of Metropolitan Health
Networks, Inc. (NYSE: MDF) in a transaction valued at approximately
$850 million plus transaction costs. Headquartered in Boca Raton,
Florida, Metropolitan is a Medical Services Organization that
provides and coordinates medical care for approximately 87,500
Medicare Advantage, Medicaid, and other beneficiaries, primarily in
Florida utilizing a primary care-centric business model.
Metropolitan’s integrated care delivery systems include
approximately 35 state-of-the-art primary care medical centers and
a robust network of affiliated physicians serving mainly Humana
members.
In connection with the closing of this transaction, Metropolitan
stockholders will receive $11.25 per share in cash from Humana for
each Metropolitan share held. Humana will also repay all of
Metropolitan’s outstanding debt.
Humana has financed the transaction primarily through the recent
issuance of senior notes. The company continues to anticipate the
transaction to be modestly accretive to its earnings for the year
ending December 31, 2013 (FY13). Humana expects to update its
earnings guidance for FY13 to reflect the closing of the
Metropolitan acquisition in conjunction with its fourth quarter
2012 earnings release on February 4, 2013.
Cautionary Statement
This news release includes forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995.
When used in investor presentations, press releases, Securities and
Exchange Commission (SEC) filings, and in oral statements made by
or with the approval of one of Humana’s executive officers, the
words or phrases like “expects,” “anticipates,” “intends,” “likely
will result,” “estimates,” “projects” or variations of such words
and similar expressions are intended to identify such
forward-looking statements. These forward-looking statements are
not guarantees of future performance and are subject to risks,
uncertainties, and assumptions, including, among other things,
information set forth in the “Risk Factors” section of Humana’s SEC
filings, as well as the other information that Humana may provide
with respect to the pending merger, a summary of which includes but
is not limited to the following:
- If Humana does not design and price its
products properly and competitively, if the premiums Humana charges
are insufficient to cover the cost of health care services
delivered to its members, if the company is unable to implement
clinical initiatives to provide a better health care experience for
its members, lower costs and appropriately document the risk
profile of its members, or if its estimates of benefit expenses are
inadequate, Humana’s profitability could be materially adversely
affected. Humana estimates the costs of its benefit expense
payments, and designs and prices its products accordingly, using
actuarial methods and assumptions based upon, among other relevant
factors, claim payment patterns, medical cost inflation, and
historical developments such as claim inventory levels and claim
receipt patterns. These estimates, however, involve extensive
judgment, and have considerable inherent variability because they
are extremely sensitive to changes in payment patterns and medical
cost trends.
- If Humana fails to effectively
implement its operational and strategic initiatives, including its
Medicare initiatives, the company’s business may be materially
adversely affected, which is of particular importance given the
concentration of the company’s revenues in the Medicare
business.
- If Humana fails to properly maintain
the integrity of its data, to strategically implement new
information systems, to protect Humana’s proprietary rights to its
systems, or to defend against cyber-security attacks, the company’s
business may be materially adversely affected.
- Humana’s business may be materially
adversely impacted by CMS’s adoption of a new coding set for
diagnoses.
- Humana is involved in various legal
actions and governmental and internal investigations, including
without limitation, an ongoing internal investigation and
litigation and government requests for information related to
certain aspects of its Florida subsidiary operations, any of which,
if resolved unfavorably to the company, could result in substantial
monetary damages. Increased litigation and negative publicity could
increase the company’s cost of doing business.
- As a government contractor, Humana is
exposed to risks that may materially adversely affect its business
or its willingness or ability to participate in government health
care programs.
- Recently enacted health insurance
reform, including The Patient Protection and Affordable Care Act
and The Health Care and Education Reconciliation Act of 2010, could
have a material adverse effect on Humana’s results of operations,
including restricting revenue, enrollment and premium growth in
certain products and market segments, restricting the company’s
ability to expand into new markets, increasing the company's
medical and operating costs by, among other things, requiring a
minimum benefit ratio on insured products (and particularly how the
ratio may apply to Medicare plans, including aggregation,
credibility thresholds, and its possible application to
prescription drug plans), lowering the company’s Medicare payment
rates and increasing the company’s expenses associated with a
non-deductible federal premium tax and other assessments; financial
position, including the company's ability to maintain the value of
its goodwill; and cash flows. In addition, if the new
non-deductible federal premium tax and other assessments, including
a three-year commercial reinsurance fee, were imposed as enacted,
and if Humana is unable to adjust its business model to address
these new taxes and assessments, such as through the reduction of
the company’s operating costs, there can be no assurance that the
non-deductible federal premium tax and other assessments would not
have a material adverse effect on the company’s results of
operations, financial position, and cash flows.
- Humana’s business activities are
subject to substantial government regulation. New laws or
regulations, or changes in existing laws or regulations or their
manner of application could increase the company’s cost of doing
business and may adversely affect the company’s business,
profitability and cash flows.
- Any failure to manage administrative
costs could hamper Humana’s profitability.
- Any failure by Humana to manage
acquisitions and other significant transactions successfully may
have a material adverse effect on its results of operations,
financial position, and cash flows.
- If Humana fails to develop and maintain
satisfactory relationships with the providers of care to its
members, the company’s business may be adversely affected.
- Humana’s pharmacy business is highly
competitive and subjects it to regulations in addition to those the
company faces with its core health benefits businesses.
- Changes in the prescription drug
industry pricing benchmarks may adversely affect Humana’s financial
performance.
- If Humana does not continue to earn and
retain purchase discounts and volume rebates from pharmaceutical
manufacturers at current levels, Humana’s gross margins may
decline.
- Humana’s ability to obtain funds from
its subsidiaries is restricted by state insurance regulations.
- Downgrades in Humana’s debt ratings,
should they occur, may adversely affect its business, results of
operations, and financial condition.
- Changes in economic conditions could
adversely affect Humana’s business and results of operations.
- The securities and credit markets may
experience volatility and disruption, which may adversely affect
Humana’s business.
- Given the current economic climate,
Humana’s stock and the stock of other companies in the insurance
industry may be increasingly subject to stock price and trading
volume volatility.
In making forward-looking statements, Humana is not undertaking
to address or update them in future filings or communications
regarding its business or results. In light of these risks,
uncertainties, and assumptions, the forward-looking events
discussed herein may or may not occur. There also may be other
risks that the company is unable to predict at this time. Any of
these risks and uncertainties may cause actual results to differ
materially from the results discussed in the forward-looking
statements.
Humana advises investors to read the following documents as
filed by the company with the SEC for further discussion both of
the risks it faces and its historical performance:
- Form 10-Ks for the year ended December
31, 2011;
- Form 10-Qs for the quarters ended March
31, 2012, June 30, 2012, and September 30, 2012 (as amended by the
Form 10-Q/A filed on December 4, 2012);
- Form 8-Ks filed during 2012.
About Humana
Humana Inc., headquartered in Louisville, Kentucky, is a leading
health care company that offers a wide range of insurance products
and health and wellness services that incorporate an integrated
approach to lifelong well-being. By leveraging the strengths of its
core businesses, Humana believes it can better explore
opportunities for existing and emerging adjacencies in health care
that can further enhance wellness opportunities for the millions of
people across the nation with whom the company has
relationships.
More information regarding Humana is available to investors via
the Investor Relations page of the company’s web site at
www.humana.com, including copies of:
- Annual reports to stockholders;
- Securities and Exchange Commission
filings;
- Most recent investor conference
presentations;
- Quarterly earnings news releases;
- Replays of most recent earnings release
conference calls;
- Calendar of events (including upcoming
earnings conference call dates and times, as well as planned
interaction with research analysts and institutional
investors);
- Corporate Governance information.
About Metropolitan
Metropolitan Health Network, Inc., a subsidiary of Humana Inc.,
is a growing health care company that provides and coordinates
comprehensive health care services for Medicare Advantage,
Medicaid, and other customers through its primary care-centric
businesses, MetCare of Florida, Inc., Continucare Corporation, and
Symphony Health Partners, Inc. Metropolitan currently owns and
operates approximately 35 medical centers and contracts with a
network of independent primary care practices.
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