Despite a potential scandal, investors continue to bid up shares of WellCare Health Plans Inc. in Thursday afternoon trading as the company was rumored Wednesday to be a takeover target. WellCare has risen $3.26, or 7.01%, to $49.82. That's on top of the 6.5% gain WellCare already made on Wednesday. Specifically, Fortune reported Wednesday that WellCare was rumored to be in M&A talks with UnitedHealthcare Group Inc. while the Financial Times said Thursday Aetna Inc. and Humana Inc. are interested in the Tampa, Fla.-based company. Additionally, Stifel Nicolaus Capital Market analyst Thomas Carroll suggested in a January note that health insurer Wellpoint Inc. was a likely buyer.
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Hypothetically, WellCare would make an interesting addition to UnitedHealth, Humana or Aetna. The reason? WellCare fills a specific niche by providing managed care primarily to government-sponsored healthcare programs, focusing on Medicaid and Medicare. It's a niche that's a potential bonanza on the surface with the baby boom generation hitting retirement age and flooding the Medicaid and Medicare programs.
But, at the same time, calls to control federal spending recently has forced the government to keep spending down in the Medicaid and Medicare programs, which may take a bite out of WellCare's bottom line. A dark cloud also still hovers over WellCare, as the Financial Times reports the FBI is still looking into some questionable cost reporting in WellCare's Medicaid businesses. - Gerald Magpily
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See Dealscape: WellCare Health could go on the block
