Institutional Shareholder Services has shown support for Centene Corporation's planned acquisition of smaller rival WellCare Health Plans Inc WCG.N by recommending shareholders favor the deal, the health insurers said on Wednesday.
Centene in March said it would buy WellCare for $15.27 billion, in a move to bulk up its government-backed Medicare and Medicaid businesses while reducing exposure to Obamacare healthcare exchanges.
SVB Leerink analyst Ana Gupte called the ISS recommendation unsurprising and said that shareholders will likely vote in favor of the deal on June 24, when both companies are set to hold meetings.
"We expect, in the short term Centene stock will be volatile, with risk arbitrage funds shorting the name," she added.
Last month, Reuters reported that hedge funds Corvex Management LP and Sachem Head Capital Management LP, which have stakes in Centene, were exploring challenging the WellCare deal, citing people familiar with the matter.
Some healthcare investors had also speculated Humana Inc would make a bid for Centene, but the company earlier this month confirmed it had no intention of doing so.
(Reporting by Tamara Mathias in Bengaluru; Editing by Shinjini Ganguli) ((Tamara.Mathias@thomsonreuters.com; within U.S. +1 646 223 8780, outside U.S. +91 806749 1208; Reuters Messaging: tamara.mathias.thomsonreuters.com@reuters.net))
