Filed by Centene Corporation
Pursuant to Rule 425 under the Securities Act of 1933, as
amended, and
deemed filed pursuant to Rule 14a-12 under the
Securities Exchange Act of 1934, as amended
Subject Company: Health Net, Inc.
Commission File No.: 1-12718
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Wells Fargo 10th Annual Healthcare Conference-Boston
September 9-10, 2015
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Safe Harbor Statement
Cautionary Statement Regarding Forward-Looking Statements
This document contains certain forward-looking statements with respect to the financial condition, results of operations and business of Centene, Health Net and the combined businesses of Centene and Health Net and certain plans and objectives of Centene and Health Net with respect thereto, including the expected benefits of the proposed merger. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements often use words such as “anticipate”, “target”, “expect”, “estimate”, “intend”, “plan”, “goal”, “believe”, “hope”, “aim”, “continue”, “will”, “may”, “would”, “could” or “should” or other words of similar meaning or the negative thereof. There are several factors which could cause actual plans and results to differ materially from those expressed or implied in forward-looking statements. Such factors include, but are not limited to, the expected closing date of the transaction; the possibility that the expected synergies and value creation from the proposed merger will not be realized, or will not be realized within the expected time period; the risk that the businesses will not be integrated successfully; disruption from the merger making it more difficult to maintain business and operational relationships; the risk that unexpected costs will be incurred; changes in economic conditions, political conditions, changes in federal or state laws or regulations, including the Patient Protection and Affordable Care Act and the Health Care Education Affordability Reconciliation Act and any regulations enacted thereunder, provider and state contract changes, the outcome of pending legal or regulatory proceedings, reduction in provider payments by governmental payors, the expiration of Centene’s or Health Net’s Medicare or Medicaid managed care contracts by federal or state governments and tax matters; the possibility that the merger does not close, including, but not limited to, due to the failure to satisfy the closing conditions, including the receipt of approval of both Centene’s stockholders and Health Net’s stockholders; the risk that financing for the transaction may not be available on favorable terms; and risks and uncertainties discussed in the reports that Centene and Health Net have filed with the Securities and Exchange Commission (the “SEC”). These forward-looking statements reflect Centene’s and Health Net’s current views with respect to future events and are based on numerous assumptions and assessments made by Centene and Health Net in light of their experience and perception of historical trends, current conditions, business strategies, operating environments, future developments and other factors they believe appropriate. By their nature, forward-looking statements involve known and unknown risks and uncertainties because they relate to events and depend on circumstances that will occur in the future. The factors described in the context of such forward-looking statements in this announcement could cause Centene’s and Health Net’s plans with respect to the proposed merger, actual results, performance or achievements, industry results and developments to differ materially from those expressed in or implied by such forward-looking statements. Although it is believed that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been correct and persons reading this announcement are therefore cautioned not to place undue reliance on these forward-looking statements which speak only as of the date of this announcement. Neither Centene nor Health Net assumes any obligation to update the information contained in this announcement (whether as a result of new information, future events or otherwise), except as required by applicable law. These risks, as well as other risks associated with the merger, are more fully discussed in the preliminary joint proxy statement/prospectus, as it may be amended, that is included in the Registration Statement on Form S-4 that has been filed with the SEC on August 18, 2015 in connection with the merger. A further list and description of risks and uncertainties can be found in Centene’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014 and in its reports on Form 10-Q and Form 8-K as well as in Health Net’s Annual Report on Form 10-K for the fiscal year ended December 31, 2014 and in its reports on Form 10-Q and Form 8-K.
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Safe Harbor Statement
Additional Information and Where to Find It
The proposed merger transaction involving Centene and Health Net will be submitted to the respective stockholders of Centene and Health Net for their consideration. In connection with the proposed merger, Centene prepared a registration statement on Form S-4 that included a preliminary joint proxy statement/prospectus for the stockholders of Centene and Health Net filed with the SEC on August 18, 2015. At the appropriate time, each of Centene and Health Net will mail the definitive joint proxy statement/prospectus to their respective stockholders and file other documents regarding the merger with the SEC. These materials are not yet final and will be amended. Centene and Health Net urge investors and stockholders to read the definitive joint proxy statement/prospectus when it becomes available, as well as other documents filed with the SEC, because they will contain important information. Investors and security holders may receive the registration statement containing the joint proxy statement/prospectus and other documents free of charge at the SEC’s web site, http://www.sec.gov. These documents can also be obtained (when they are available) free of charge from Centene upon written request to the Investor Relations Department, Centene Plaza 7700 Forsyth Blvd. St. Louis, MO 63105, (314) 725-4477 or from Centene’s website, http://www.centene.com/investors/, or from Health Net upon written request to the Investor Relations Department, Health Net, Inc. 21650 Oxnard Street Woodland Hills, CA 91367, (800) 291-6911, or from Health Net’s website, www.healthnet.com/InvestorRelations.
Participants in Solicitation
Centene, Health Net and their respective directors and executive officers and other members of management and employees may be deemed to be participants in the solicitation of proxies from the respective stockholders of Centene and Health Net in favor of the merger. Information regarding the persons who may, under the rules of the SEC, be deemed participants in the solicitation of the respective stockholders of Centene and Health Net in connection with the proposed merger is set forth in the preliminary joint proxy statement/prospectus filed with the SEC on August 18, 2015. You can find information about Centene’s executive officers and directors in its definitive proxy statement for its 2015 Annual Meeting of Stockholders, which was filed with the SEC on March 16, 2015. You can find information about Health Net’s executive officers and directors in its definitive proxy statement for its 2015 Annual Meeting of Stockholders, which was filed with the SEC on March 26, 2015. You can obtain free copies of these documents from Centene and Health Net using the contact information above.
No Offer or Solicitation
This communication shall not constitute an offer to sell or the solicitation of an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offer of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act of 1933, as amended, and otherwise in accordance with applicable law.
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Earnings Guidance Policy
Our Company’s policy is, “that the Company undertakes no obligation to update its earnings guidance, other than as part of its quarterly or yearly earnings disclosure, and that silence on guidance by the Company or Company officials should not be interpreted that guidance has or has not changed. In any event, no updated guidance would ever be given that is not previously or simultaneously disclosed in an SEC filing or other broad non-exclusionary means.”
“Further, it is Company policy to generally not hold discussions with investors commencing two weeks prior to earnings release.”
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Enhanced
Capabilities for Delivering High Quality, Affordable Healthcare
1. Growth in 2017 and beyond
2. Critical mass
3. Increased capabilities
4. Pro Forma 2015E Premium & Service Revenue of $37B
5. Pro Forma 2015E Adj. EBITDA in excess of $1.5B
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Enhanced Capabilities for Delivering High Quality, Affordable Healthcare
Health Net adds over 6M members* & Key Capabilities in Growth Products
1.8M Medicaid members*
Provides deeper penetration in California—the largest Medicaid state with 12 million beneficiaries
Nearly 270K Medicare Advantage members * in CA, AZ, OR & WA
Provides a 4 Star Medicare Advantage capability
Over 65% of Medicare beneficiaries are at or below 400% of the FPL
Opportunity to leverage HNT’s MA platform across CNC states
Nearly 290K Exchange members *
Complimentary Exchange approach—focused on targeted “low-income” populations
27K Dual Demonstration members *
122K Prison Health Eligibles *
Other Government Contracts Business:
2.8M TRICARE members *
Approximately 5M VA eligibles*
Government Contracts revenues of at least $600M expected for FY2015
Opportunity for increased specialty company growth
* Membership as of 6/30/15
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Key Transaction Terms
Purchase Price
$28.25 in cash plus 0.622 shares of Centene
Implies $78.57 per Health Net share based on July 1st close
Total transaction value of $6.8B, including assumption of Health Net debt
Ownership
Centene shareholders to own ~71% of Company and Health Net shareholders to own ~29% of Company
Financing
Financing commitment of $2.7B
Pro forma debt to capital ratio of ~40%, based on July 1st close
Permanent financing to consist primarily of senior notes
Projected Financial Impact
Greater than 10% accretive to GAAP EPS in first full year
Greater than 20% accretive to Adjusted EPS in first full year
Pre tax synergies of $150M by the end of year 2; half in year 1 (On top of Cognizant Savings)
Path to Closing
Expect to close in early 2016
Health Net and Centene shareholder approval
Granted early termination of the waiting period required under Hart-Scott-Rodino
Customary State approvals—including “change of control” approvals from State insurance and health regulators in Arizona, California, and Oregon
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Cost Synergy Opportunities
Core G&A Efficiencies
Specialty Company Integration
Medical Costs
Technology Platform
$150M in Year 2
On Top of Cognizant Savings
Savings Are Incremental to Growth Opportunity
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Critical Mass: Leader in High Quality Affordable Plans
Pro Forma Membership as of 6/30/15
Medicaid: 6.0 million
Specialty / Government: 3.1 million
Commercial / Exchanges: 1.3 million
Medicare: 280,000
Duals: 50,000
Total 10.7 million
Centene
Health Net
Common States
Note: Map excludes Health Net’s TRICARE North Region membership
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Diversifying and Setting the Stage for
2016 and Beyond
2015E Revenue: $21 billion
2015E Revenue: $16 billion
2015E Pro Forma Revenue: $37 billion
Note: Estimate of revenue represents Premium and Service revenue and excludes health insurer fee revenue, premium taxes and investment income
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Significant and Real Growth
Opportunities
Leader in Medicaid
Increased Medicare Advantage Presence
Enhanced Opportunity for Targeted Exchange Populations
Additional Government Health Programs
Leverage Specialty Platform
Introduces Commercial Group Business
National Presence Leadership Position
4 Star Plans Centene States
Leader in Quality Affordable Plans Value Based Networks
VA TRICARE
Depth and Breadth of Integrated Specialty Products
Harnesses strong distribution channels
Provides opportunities on private exchanges
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Increased Addressable Segments by Product
Increased Addressable Segments by Product $612B
Medicare $689B
Health Insurance Marketplace $104B
Correctional Healthcare $9B
$1.4 trillion
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US Health Care – Public Financing
Millions of Beneficiaries
Source: HMA, 2014
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Current Pipeline
Medicaid & CHIP
Health Insurance Marketplace
Medicare (Duals)
Correctional Healthcare
Opportunity for Deeper Penetration in Segment
$140 billion
(Note: this figure does not include additional Medicare Advantage in CNC States)
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Centene Has Delivered Growth Since 2008
HEALTHCARE COVERAGE SOLUTIONS
Government Solutions AZ FL GA IN OH SC TX WI
Low-Income Medicaid
CHIP
ABD (non duals)
ABD (dual-eligible) or Dual Demonstrations
Long-Term Services and Supports
Foster Care
Medicare Special Needs Plan
Specialty Health Solutions
Pharmacy Benefits
Behavioral & Specialty Therapies
Life & Health Management
Managed Vision
Telehealth
8 States
70 Solutions
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Combination Creates Increased Product Diversity Across a Broader Footprint (Pro Forma 2015)
Government Solutions AZ AR CA FL GA IL IN KS LA MA MI MN MS MO NH OH OR SC TN TX VT WA WI
TANF
Medicaid Expansion
CHIP
ABD (non-duals)
ABD (Medicaid only dual-eligibles)
Dual Demonstrations
Intellectually/Developmentally Disabled
Long-Term Services and Supports
Foster Care
Medicare Advantage
Medicare Special Needs Plan
Health Insurance Marketplace
Managed Vision
Dental Benefits1
Telehealth (Nurse Triage and Education Line)
1Centene is in process of transitioning dental services from external vendors to our new dental benefit management subsidiary.
Note: Does not include HNT’s Group Commercial and TRICARE lines of business.
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Enhanced Capabilities for Delivering High Quality, Affordable Healthcare
Scale in Government Programs
Leading position in Government programs: Medicaid, Medicare, VA and TRICARE
PF 2015E Premium & Service Revenue of $37B and Adj. EBITDA in excess of $1.5B
Opportunity to leverage specialty programs
Increased Capabilities
Provides scale and expertise in Medicare
Strong quality position with 4 Star plan
Innovative capabilities for value based Exchange & consumer products
Platform for Expanded Growth
Significant growth opportunity in Medicare, Exchanges & other Gov’t programs
Leadership in CA, FL and TX
Expanded growth pipeline
Compelling Financial Profile
In first year, GAAP EPS accretion of >10% and Adjusted EPS accretion > 20%
Prudent capital structure with debt to capital of ~40%
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Wells Fargo 10th Annual Healthcare Conference-Boston
September 9-10, 2015