Activist investor takes majority $900M stake in Centene
Newly-launched hedge fund Politan Capital Management has purchased a $900 million stake in Centene Corp., the St. Louis-based insurer confirmed Wednesday.
Politan is headed by activist investor Quentin Koffey, who left Senator Investment Group in August to start his own hedge fund. Koffey is now interested in refreshing Centene’s board and other actions aimed at increasing the company’s value, the Wall Street Journal initially reported. In a news release, Centene said it plans to grow adjusted net income margins 3.3% by 2024 by scaling certain businesses and selling other “non-core” components.
“We welcome constructive ideas to enhance these efforts,” Centene wrote.
And the company has already made moves. The insurer announced on Wednesday it will sell its majority stake in home health provider U.S. Medical Management to private equity firms Rubicon Partners, Valtrius, Oak HC/FT and HLM Venture Partners. The terms of the deal were not disclosed, and Centene will continue to hold a minority stake in USMM.
Centene will use the proceeds from the sale to repurchase stock, Sarah London, vice chairman of Centene’s board of directors, said in a news release.
“We are confident this transaction will best position USMM to expand its reach and impact while helping Centene to deliver on our value creation plan,” London said.
Centene said it has also focused on updating its board.
Koffey recommended former WellCare Health Plans CEO Kenneth Burdick and past Anthem chief financial officer Wayne DeVeydt join the insurer as board directors, WSJ said. An opportunity to update the company’s board will open later this month. Centene paid $17 billion for Medicare Advantage insurer Wellcare in 2020. Koffey did not immediately respond to interview requests.
Over the past two years, Centene said it has added four new directors to its board, three of whom are independent. The most recent addition came in September when Sarah London, who serves as president of the company’s non-insurance health care enterprises division and executive vice president of advanced technology business line, was appointed vice chairman of the board.
A month after the announcement, David Steward retired from Centene’s board after 14 years of service. He said he wanted to spend more time with his family and pursue other business interests.
“The company intends to make further changes to the composition of the board and diversity will continue to be a strong consideration,” the insurer said.
The insurer has made other recent, and abrupt changes, to its personnel.
In September, Brent Layton was also named chief operating officer of Centene and the office of the president changed its name to the office of the chairman and CEO. Centene is headed by long-time CEO Michael Neidorff.
Later that month, Centene and long-time executive Jeffrey Schwaneke “mutually agreed” that he should resign, after 13 years of work at the insurer. Schwaneke had more recently served as executive vice president of healthcare enterprises, where he was transferred to six months before as part of the insurer’s professional development program. The transfer moved him from reporting to the insurer’s top office to Sarah London. No further details were disclosed.
At the end of October, Centene and former executive vice president and chief strategy officer Jesse Hunter also agreed to part ways, with Hunter’s last day being Nov. 5 rather than at the end of 2021, according to a filing with the U.S. Securities and Exchange Commission. The insurer did not disclose why Hunter was ending his 19-year stretch at the company early.
At the end of the company’s most recent third quarter on September 30, Centene reported $32.4 billion in revenue, up 11% from the $29.1 billion reported during the same time last year. The company reported net income of $584 million, up 4% from $561 million reported during the same time last year.