 Cantor Fitzgerald Inaugural
Healthcare Conference –
New York City
July 8, 2015 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 |
 2 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. 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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 3 Safe Harbor Statement Additional Information and Where to Find It Participants in Solicitation No Offer or Solicitation 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 will prepare a registration statement on Form S-4 that will include a joint proxy statement/prospectus for the stockholders of Centene and Health Net to be filed with the SEC, and each will mail the joint proxy
statement/prospectus to their respective stockholders and file
other documents regarding the proposed transaction with the SEC. Centene and Health Net urge investors and stockholders to read the 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
will be able to 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. 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 will be set forth in the joint proxy
statement/prospectus when it is filed with the SEC. 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. 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
4 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.” |
 5 Enhanced Capabilities for Delivering High Quality, Affordable Healthcare Health Net adds over 6M members & key capabilities in growth products
–
1.7M Medicaid members; strengthens leading position in Medicaid
–
Enhances national leadership position in LTSS
–
4 Star Medicare Advantage capability with $3B in revenue and 275k
members –
Deep experience with Duals and other underserved populations
–
Attractive Exchange capabilities including 300k members
–
Brings complementary focus on targeted Exchange population
–
Innovative capabilities with value based product set built on leading provider
network –
Participation in additional government programs including VA and TRICARE
serving over 2.8M members
Pro Forma 2015E Premium & Service Revenue of $37B and Adj. EBITDA in excess
of $1.5B |
 6 Key Transaction Terms $28.25 in cash plus 0.622 shares of Centene Implies $78.57 per Health Net share based on July 1 st close Total transaction value of $6.8B, including assumption of Health Net debt Purchase Price Purchase Price 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 Expect to close in early 2016 Health Net and Centene shareholder approval Expiration of Hart-Scott-Rodino waiting period and customary State approvals—
including “change of control” approvals from State insurance and
health regulators in Arizona, California and Oregon.
Financing commitment of $2.7B
Pro forma debt to capital ratio of ~40%
Permanent financing to consist primarily of senior notes
Projected Financial Impact Projected Financial Impact Path to Closing Path to Closing Financing Financing Ownership Ownership Centene shareholders to own ~71% of Company and Health Net shareholders to own ~29% of Company |
 7 Cost Synergy Opportunities Core G&A Efficiencies Specialty Company Integration Medical Costs Technology Platform $150M in Year 2 |
 8 Leader in High Quality Affordable Plans Health Net Centene Common States Medicaid: 5.7 million Specialty / Government: 3.1 million Commercial / Exchanges: 1.3 million Medicare: 275,000 Duals: 40,000 Total 10.4 million Pro Forma Membership as of 3/31/15 Pro Forma Membership as of 3/31/15 Note: Map excludes Health Net’s TRICARE North Region membership |
 9 Medicaid Leadership Combination Results in the Largest Medicaid Player 5.7 5.6 5.0 4.0 2.6 2.4 1.7 Peer Peer Peer Peer 1 2 3 4 5 6 - |
 10 Diversifying into Adjacent Growth Markets Commercial / Exchanges Medicaid Medicare Specialty / Government Duals Note: Estimated revenue represents Premium and Service revenue 2015E Revenue: $16 billion* 2015E Pro Forma Revenue: $37 billion 2015E Revenue: $21 billion 83% 2% 0.7% 11% 4% 39% 34% 19% 4% 4% 64% 16% 8% 8% 4% |
 11 Attractive Growth Opportunities Increased Medicare Advantage Presence 4 Star Plans 275k Members Enhanced Opportunity for Targeted Exchange Populations Leader in Quality Affordable Plans Value Based Networks Additional Government Health Programs VA TRICARE Leverage Specialty Platform Depth and Breadth of Integrated Specialty Products Leader in Medicaid National Presence 5.7M Members |
 Segment Size by Product
12 Medicaid & CHIP Medicare (Duals) Correctional Healthcare Health Insurance Marketplace $612B $612B $234B $234B $104B $104B $9B $9B $959 billion $959 billion |
 US
Health Care – Public Financing
13 2014 2019 2024 72 91 93 50 62 72 7 14 21 5 5 5 CHIP Exchange Medicare Medicaid 134 million (42% of Americans) 172 million (52% of Americans) 191 million (56% of Americans) Source: HMA, 2014 Millions of Beneficiaries |
 Current Pipeline
14 Medicaid & CHIP Medicare (Duals) Correctional Healthcare Health Insurance Marketplace $140 billion $140 billion Both companies participate in each of these segments |
 Market Opportunity by Product
15 Medicaid Medicare (Duals) Health Insurance Marketplace • National leader in Medicaid Managed Care • National leadership in MLTSS • Fastest growing Medicaid Managed Care Segment • Expands Medicare pipeline beyond duals • Over 35% of Medicare beneficiaries are under 200% FPL • Over 65% of Medicare beneficiaries are under 400% FPL • 4 Star platform • Aligned strategy focused on subsidized populations Correctional Healthcare • Provides correctional healthcare services in 6 markets combined |
 Health Solutions -
2008 16 States 70 Solutions 8 |
 17 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 Correctional Healthcare Specialty Health Solutions Pharmacy Benefits Behavioral & Specialty Therapies Life & Health Management Primary Care Solutions for Complex Populations Managed Vision Dental Benefits 2 Telehealth (Nurse Triage and Education Line) 1 Entry underway with acquisition of Agate Resources anticipated to close in Q3 2015.
2 Centene is in process of transitioning dental services from external vendors to our new dental benefit management
subsidiary. 3
Does not include HNT’s Group Commercial and TRICARE lines of
business. 23 States
237 Solutions
1 Health Solutions – Pro Forma 2015 |
 18 Medicaid High Quality Value Based Networks High Quality Value Based Networks Integrated Specialty Solutions Integrated Specialty Solutions Common Technology Platform Common Technology Platform Targeted Exchange Medicare Advantage Leveraging Core Capabilities Across Government Programs |
 19 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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 Cantor Fitzgerald Inaugural
Healthcare Conference –
New York City
July 8, 2015 |