Anthem Closes Simply Healthcare Buyout

Anthem Inc (NYSE:ANTM) has recently acquired one of the leading managed care companies, Simply Healthcare Holdings, Inc. With this acquisition, Anthem aims to enhance its offerings to the Medicaid and Medicare program enrollees in the State of Florida.

The deal was announced earlier in Dec 2014 and was pending regulatory approval.

Henceforth, Simply Healthcare will function as a wholly-owned subsidiary of Anthem and its management team will join Anthem’s government business division.

Being a popular name in the managed care space, Simply Healthcare is expected to complement the capacities of Anthem by increasing its product portfolio and strengthening its presence in Florida. Anthem has a strong Floridian foothold when it comes to Medicaid. This acquisition will give the company an added push in the Medicare Advantage space as well.

Moreover, Simply Healthcare caters to 177,000 Medicaid and 21,000 Medicare members. With the integration of this entity to Anthem’s portfolio, its health plan membership in Florida is expected to increase to more than 500,000, which is indeed a positive indicator for top-line growth.

With the growing demand for superior and customer specific products in the Medicaid and Medicare Advantage space in Florida, we expect the deal to help Anthem emerge as a leader, catering to a vast population in the state.

Although the deal is expected to have no material impact to 2015 earnings, we believe initiatives like these (acquiring well-known entities with similar operations) will have enduring results as they lift up the company’s reputation, thereby helping it to deliver long-term improvement. Particularly, with Anthem, initiatives like these are necessary now to boost investor sentiment, after the major data breach in Jan 2015 that might have tarnished the company’s goodwill to some extent.

Anthem currently holds a Zacks Rank #2 (Buy). Other stocks in the healthcare services space that look attractive at current levels include Aetna Inc (NYSE:AET), Centene Corporation (NYSE:CNC) and Health Net Inc (NYSE:HNT). All three have the same Zacks Rank as Anthem.

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