Church, Cuomo Could Derail Centene's $3.75 Billion New York Deal
(Bloomberg) -- A convoluted dispute between New York’s bishops and Governor Andrew Cuomo is putting at risk Centene’s $3.75 billion deal to buy the state’s nonprofit insurer Fidelis Care.
The Catholic dioceses of New York State, who oversee Fidelis, want to use proceeds from the sale to start a new foundation caring for the poor. Governor Cuomo has other plans, proposing in his fiscal 2019 budget that the state keep the proceeds, using them for Medicaid and other state health-care programs.
If lawmakers pass the governor’s proposal as it stands, the bishops have indicated they may not proceed with the sale. That may spook Centene investors, since the deal would expand the St. Louis, Missouri-based health insurer’s Medicaid footprint to New York and boost earnings.
The "situation is fluid," Evercore analyst Michael Newshel said in an email, adding that the dispute could break the deal as the Church has already suggested it may not proceed if it has to turn over the proceeds. "This possibility is discounted in the stock valuation."
Centene’s spokeswoman Marcela Manjarrez-Hawn didn’t return requests for comment on the Church dispute. A Fidelis representative also declined to comment.
New York Division of the Budget spokesman Morris Peters said in an email yesterday that “the state’s primary concern is ensuring access to quality healthcare for all New Yorkers," and officials "will review every proposed transaction on the merits through that critical lens."
Meanwhile, Centene investors are closely watching April 1st. New York lawmakers are expected to OK a budget by then, including a vote on Cuomo’s proposal. This is also when Centene is expecting to close the Fidelis deal, although a recent filing also points to later in the second quarter.
The insurer, which specializes in Medicaid coverage, is planning a $2.3 billion offering to help fund the deal.
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