To push its services in the Wisconsin market, Molina Healthcare Inc. (MOH) signed an agreement on Monday to acquire Abri Health Plan for approximately $16 million. The transaction will close by August 31, 2010.
 
Abri Health Plan provides Medicaid managed care services to BadgerCare Plus and SSI Managed Care enrollees in Wisconsin.
 
Molina anticipates paying approximately $16 million for Abri Health Plan, subject to adjustments. The transaction consideration will be funded with available cash or borrowing under the credit facility of Molina. Further, the pact is expected to close by August end, after taking into consideration the regulatory approvals and other closing conditions.
 
With the completion of the deal, Molina will be able to expand its presence in Wisconsin. Molina will also offer health plan services in ten Medicaid markets all over the country. Currently, Molina Healthcare has licensed health plans subsidiaries in California, Florida, Michigan, Missouri, New Mexico, Ohio, Texas, Utah and Washington, and they serve approximately 1.5 million members.
 
On the other hand, Abri Health Plan currently serves Medicaid beneficiaries in 23 counties in Wisconsin. Further, Abri expects that its membership will increase with the acceptance of the new contract, which requires Abri to provide Medicaid managed care services to BadgerCare Plus enrollees in Wisconsin’s southeast region of Kenosha, Milwaukee, Ozaukee, Racine, Washington, and Waukesha counties. This contract will be put into execution between September 1 and November 1, 2010.
 
Molina is expanding its geographic reach via acquisitions and adding to the consolidation of the industry. It acquired the Health Information Management (“HIM”), business of Unisys Corporation (UIS) for $135 million in cash in May, 2010, which currently operates as a subsidiary of Molina Healthcare under the name Molina Medicaid Solutions.
 
The acquisition proved successful for Molina as the HIM business added value to its Medicaid health plan business, and advanced its strategic plan by expanding Molina’s services and product offerings beyond managed care.
 
We believe that the diversified Abri health plan brings significant growth potential for Molina. Moreover, Molina’s dedication to providing quality patient care and supporting the doctor-patient relationship will ramp up its growth in the Wisconsin market. We are optimistic that the Molina-Abri deal will play an important role in growing and diversifying Molina’s revenues.
 
Molina has been doing significantly well lately by expanding and diversifying its services through acquisitions. This is the reason for our current short-term Strong Buy rating (Zacks #1 Rank) on the stock. The quantitative Zacks Rank for Molina indicates an upward pressure on the shares over the near term.
Read the full analyst report on “MOH”
Read the full analyst report on “UIS”
Zacks Investment Research