By Benjamin Horney

Law360 (April 30, 2020, 6:48 PM EDT) -- Magellan Health Inc. has agreed to sell Magellan Complete Care, which manages Medicaid and Medicare health plans, to Molina Healthcare Inc. for $850 million, the companies said Thursday, in a deal steered by Weil Gotshal, Sheppard Mullin and Latham & Watkins.

The deal sees Phoenix, Arizona-based managed-care provider Magellan Health selling the unit to Long Beach, California-headquartered Molina Healthcare, according to a statement. The agreement adds to Molina's portfolio a business that posted revenue of over $2.7 billion in 2019 and profits of $33 million. 

Magellan Complete Care manages full-service Medicaid and Medicare health plans, including Magellan Complete Care in Arizona, Florida and Virginia, Senior Whole Health in Massachusetts and New York, and TMG by Magellan in Wisconsin. As of December 31, 2019, the business served about 155,000 members.

"Acquiring [Magellan Complete Care] expands our geographic footprint in our core businesses of managed Medicaid, dual eligibles, and long-term services and supports," said Joe Zubretsky, president and CEO of Molina. "We believe it will allow us to scale our enterprise-wide platforms and benefit from both operating and fixed cost leverage."

Ken Fasola, CEO of Magellan Health, said in a press release announcing the deal that the divestiture will enable the company to refocus efforts on other areas of the business.

"The novel coronavirus pandemic has served to highlight that the behavioral health needs of states, health plans and individuals remain a critical societal need," Fasola noted. "In addition, Magellan's payer partners are having limited success in managing high cost populations, notably in fully integrating behavioral and physical health and managing high cost specialty drugs. Magellan has deep experience in managing some of the most complex, highest cost areas of healthcare [spending] and this transaction will enable us to better focus on these core strengths and our payer partners."

The deal is subject to regulatory approvals among other customary closing conditions, and is expected to be clinched by the end of the first quarter of next year.

Meanwhile, the two companies have entered into commercial agreements to work together on a number of initiatives, including opening a new medical pharmacy for over 3 million Molina members and establishing a behavioral health program in Virginia.

The transaction comes about two weeks after Molina scrapped a $50 million deal to buy NextLevel Health Partners Inc. because of the latter's "unwillingness to close pursuant to the terms of the acquisition agreement." Sheppard Mullin, which advised Molina on the deal for Magellan Complete Care, also counseled Molina on the NextLevel Health situation.

Weil Gotshal & Manges LLP served as legal adviser to Magellan Health, Moelis & Co. LLC acted as lead financial adviser and Goldman Sachs & Co. LLC also acting as a financial adviser. 

The Weil team was led by M&A partner Raymond Gietz and includes M&A associates Kevin Kitson, Sam Hulsey and Karl de la Roche, tax partner Helyn Goldstein, counsel Eric Remijan and associate Mary Sommers, benefits partner Amy Rubin and associates Thomas McCarthy and Lauren Sawyer, and antitrust partner Steven Bernstein and associates Rob Meyer and Rachel Williams.

Sheppard Mullin Richter & Hampton LLP and Latham & Watkins LLP acted as legal advisers to Molina, with Barclays Plc serving as financial adviser.

The Sheppard Mullin team was led by Aytan Dahukey and also included Vinay Bhupathy, Katherine Turke, and Keren Baruch. The Latham team included counsel Jason Daniels.

--Editing by Amy Rowe.

Update: This story has been updated to include more counsel information.

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