UPDATE 1-Centene to sell Illinois health plan unit to CVS to aid merger with WellCare

(Reuters) – Health insurer Centene Corp (CNC.N) said on Monday it would divest its Illinois unit, IlliniCare Health Plan Inc, to CVS Health Corp (CVS.N), as it looks to close its $15.27 billion deal to buy smaller rival WellCare Health Plans Inc (WCG.N).

The transaction entails the sale of Centene’s Medicaid and Medicare Advantage lines of business in Illinois, the company said.

“We are continuing to make progress toward completing our transaction with WellCare and the divestiture of our IlliniCare Health plan is the next step in that process,” Centene CEO Michael Neidorff said in a statement.

WellCare and Centene expect the merger to close by the first half of 2020. Shareholders of the two companies in June voted in favor of the deal, after criticism by hedge funds that saw Centene as a good target for Humana Inc (HUM.N), a larger Medicare-focused company.

Centene will retain the unit’s Medicare-Medicaid Alignment Initiative as well as a foster care contract, set to begin in Feb 2020, and said its Ambetter business would not be affected by the deal.

Financial terms of the IlliniCare deal were not disclosed.

Reporting by Manas Mishra in Bengaluru; Editing by Shinjini Ganguli

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